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International investors own record £1tn of UK stocks

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Former UK chancellor Philip Hammond, second from left, and Chinese vice-premier Hu Chunhua attend the opening of the markets at the London Stock Exchange on 17 June 2019. Photo: Henry Nicholls/WPA Pool/Getty Images

Overseas investors own more than half of the UK stock market by value, according to official figures released on Tuesday.

New data from the Office for National Statistics (ONS) showed international investors owned a record high of 55% the UK stock market in 2018. The stake equates to just over £1tn ($1.3tn) of overseas money invested in Britain.

The record high proportion comes despite the fact that UK stocks have been shunned by many international investors in the wake of the 2016 Brexit vote. Morgan Stanley analysts said last month the market has been “unloved and undervalued” and pointed out the UK market trades at a 36% discount to international peers.

However, the ONS figures reflect a long-term trend of international investors turning to British-listed stocks. Overseas cash accounted for just 4% of the UK stock market at the start of the 1980s and still only 36% by the year 2000. Ownership had reached 43% by 2010.

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The majority of international money in the UK market comes from North America, ONS data showed. The US and Canada accounted for just over half of all international ownership. European money made up another quarter, while Asian cash accounted for 15% of international money in the stock market. Just under 3% of the stock market is Middle Eastern-owned.

While the proportion of stocks owned by global investors reached a record high in 2018, the proportion held by retail investors remained near record lows.

Just 13.5% of the UK stock market was owned by individual Brits. While that figure was up from 12.3% in 2016 — the last time the ONS measured ownership — it remains well below the high of 54% reached in 1963.

Individual ownership of the stock market rapidly declined between 1970 and 1990, falling from about 50% to just 20%. It reached an all-time low of 10.2% in 2008.

UK-based financial institutions owned 8% of the stock market in 2018 and insurance companies held 4% of shares by value, the ONS said.

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