Citigroup Downgrades UK Equities Amidst AI-Driven Shift to Emerging Markets

Citigroup has taken a decisive turn in its investment strategy, sharply lowering UK equities to 'underweight' while elevating Emerging Markets (EM) to 'overweight.' This shift comes amid burgeoning opportunities tied to cyclical and AI-driven growth.

As cited in a recent note, the London market's heavy reliance on defensive sectors like consumer staples and utilities detracts from its appeal in a landscape gravitating towards growth-oriented plays. Despite stable economic activity, the UK's performance is marred by slow consumer demand and government-led dynamics.

In contrast, Emerging Markets stand to gain from favourable conditions including a prospective soft landing in the U.S. and upcoming Federal Reserve rate cuts. Citi's bullish forecast for EM is fueled by increasing AI thematic exposure, particularly in Taiwan, Korea, and China.

(With inputs from agencies.)