Ftse 100 Looking Attractive To Overseas Investors

The question that everyones asking themselves is whether we are entering a double-dip recession

, or is the current slow down is simply a reaction to the 2009/2010 surge and the upcoming cuts in public spending?

It is tempting to speculate and suggest that the current woes arent permanent as Britain begins to pay for Blair and Browns spending binge, however there are a few indications that these problems are more serious.

Two points force their way forward in that, whilst global GDP is rising, the UKs seems stuck. The huge boost afforded by the devaluing Sterling seems to have had very little effect. Secondly, for all of the quantitative easing last year, Money Supply is flat and falling.

As Tradefairs Simon Denham recently commented: I have always been slightly suspicious of economic theory that suggests a weak currency is a boost to an economy as on this basis the UK, Spain, Greece, Italy etc. in pre-Euro days should have had the strongest economies and likewise Germany, whose currency has effectively strengthened throughout the last 30 years, should have been suffering.

Weak Sterling, coupled with the Bank of England printing 275bn, seems to have transferred instead into persistently high inflation rate. And this in a time of high(ish) unemployment and low growth.

Of course, I could find several economic pointers to contradict the previous few paragraphs, however M4 Money Supply seems to be the driving factor at the moment and, with house prices now drifting lower, it seems that the UK is not about to surge any time soon.

Of course, looking at the FTSE 100 spread betting market, this makes very little difference. The vast majority of the revenues, of the FTSE 100 companies, comes from outside the UK. There is a reasonable argument that says that the index, in world currency terms, is considerably undervalued.

A foreign investor in the UKs senior index over the last three or four years would have lost vast sums on currency losses, let alone the drop in the actual market. To a European, the returns available in the FTSE would look very tempting indeed once you realise that most of your investment is not based in the UK at all.

Before you trade though please note that spread betting carries a high level of risk your capital so ensure spread betting matches your investment objectives. Spread trading carries a high level of risk. Seek independent advice where necessary. Familiarise yourself with the risks.

by: Daniel Jones

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