Salient to Investors:
Real Capital Analytics said foreigners bought more UK properties worth over $9.5 million than residents for the first time in a decade, and bought 13.5 billion pounds of UK property through Oct. 12, versus 9.3 billion pounds of domestic purchases.
Portfolio investments, including equities and debt, showed a 37.6 billion- pound net inflow in Q2, the biggest since 2009.
Foreign-exchange strategists see no weakness for sterling because international investors are flocking to the U.K. as a refuge from Europe’s debt turmoil.
Thomas Kressin at Pimco said the UK being in Europe but outside the euro zone offers a somewhat safe haven in property prices and markets, helping sterling.
Foreigners increased acquisitions of British companies by 38 percent this year over 2011, and the most since 2008. Overseas investors are adding to holdings of gilts for a 10th straight year.
Knight Frank said international investors accounted for 41 percent of London houses costing 1 million pounds or more in September, pushing the cost of luxury homes to a record.
Nick Bennenbroek at Wells Fargo said the UK will avoid the worst of the euro-zone crisis and the pound offers relative safety compared with the euro and is more resilient than earlier in 2012. Wells Fargo predicts the pound will strengthen to 78.5 pence per euro in the next six months and to 77.25 pence in 12 months.
Analysts say the UK and euro-region economies will shrink in 2012, but Britain will recover at a faster pace in subsequent years. Analysts expect UK GDP growth of 1.1 percent in 2013 and 1.8 percent in 2014, and euro area growth of 0.25 percent and 1.2 percent respectively.
Hedge funds et al expect sterling to rise versus the dollar.
Bunny Nooryani at the Norway sovereign wealth fund said the UK has a large, well-established and liquid property market.
An Investment Property Databank index shows UK properties returned 7.6 percent annually in the last 10 years versus 3.2 percent in Germany and 7.9 percent in the US.
The median economist expects the UK economy to fall 0.3 percent in 2012, the first contraction since 2009.
Daragh Maher at HSBC said the pound will weaken to 86 pence per euro by the Q2 2013 and versus the 79 pence median analyst estimate as general growth is still weak.
The median strategist year-end sterling forecast is $1.60.
BNP Paribas sees the pound at 74 pence per euro at year-end 2013. Vassili Serebriakov at BNP Paribas said sterling has been playing a safe-haven status within the context of Europe, while UK fundamentals have turned less negative. Serebriakov said he is not looking for an extreme euro-zone scenario, though the crisis won’t be resolved overnight, and sees sterling outperforming the euro.