UK equities offer attractive opportunities for income-seeking investors in 2023, according to research from Shore Capital.
While the FTSE 100 outperformed other major markets last year, the mid-caps didn’t and the valuation multiples of many domestic companies are at 'notable discounts' compared to their peers listed in other markets, the broker's analysts said in an outlook note.
The FTSE All-Share Index has the highest dividend yield among the major equity regional markets, at over 4.1% for 2023.
However, the overall outlook for equities in 2023 is 'complex' due to a range of domestic and international factors, they noted.
One significant factor is the cost of living crisis in the UK, which has impacted both consumers and businesses. While the likelihood of a recession remains, it is unclear how long it will last and how deep it will be.
Inflation, which reached a peak of over 11% in October 2022, is expected to fall back to around 4.5% by the end of 2023 as energy prices stabilise and supply-chain disruption eases, the Shore analysts said.
If energy prices and inflation recede faster than currently anticipated, the Bank of England may also end its interest rate hiking cycle earlier, investors were told.