Fund managers and independent advisers expect the FTSE 100 Index to rise further during 2006, according to an industry-wide survey.
Ninety-two per cent of financial advisers expect the market to rise overall while 77 per cent of fund managers shared their optimism.
Strong corporate cash flows and a boom in mergers and acquisitions activity were seen by fund managers as providing the main stimulus while advisers said the markets’ present strength and low interest rates were the reasons for their optimism.
Thirty-one investment managers representing £13.4bn of assets under management – one fifth of the total of assets managed by investment trust companies – and 249 advisers responded to the survey by the Association of Investment Trust Companies and IFA Promotion, a marketing organisation.
Fifty per cent of advisers and 47 per cent of fund managers expect the index – currently about 5,680 – to reach up to 6,000 by the end of the year. But 27 per cent of fund managers and 15 per cent of advisers expect the index to rise to more than 6,000.
Emerging markets were seen as the top geographical area in which to invest by 27 per cent of advisers while Japan topped the poll among 18 per cent of fund managers.
Among sectors, financial companies were nominated by 21 per cent of fund managers while 18 per cent of advisers favoured smaller companies.
But about a third of managers and advisers saw a lack of consumer spending as the greatest threat while 17 per cent of managers highlighted rising interest rates. Advisers were more worried about terrorism.
“What is perhaps most encouraging is the rapidly evolving trend of companies returning value to shareholders,” said Bruce Stout, manager of Murray International.
“Five per cent dividend yields are common today and sustainable double-digit dividend growth is increasingly the norm.”
“The equity market has had a good run but we believe shares are historically lowly rated,” said Iain Lynn, manager at Shires Income. “A large percentage of the rise has been due to the mining and oil sectors. Other areas that have been left behind now offer good value.”
