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View the article online at http://citywire.co.uk/wealth-manager/article/a721864

JPM’s AA-rated star: Funding for Lending shift positive for housebuilders

by Robert St George on Dec 02, 2013 at 12:36

JPM’s AA-rated star: Funding for Lending shift positive for housebuilders

John Baker, the Citywire AA-rated manager of the JP Morgan UK Dynamic fund, has argued that last week’s move by the Bank of England to refocus its Funding for Lending scheme away from mortgages is in fact positive for housebuilders.

Immediately upon the Bank’s announcement, shares in Taylor Wimpey fell by 7%, in Persimmon by 5%, and in Bovis by 8%.

‘The announcement could almost be seen as a positive because it suggests that the Bank of England views the lending recovery as self-sustaining and that is a positive indicator,’ commented Baker.

The manager therefore confirmed that he would maintain his 4% overweight position in housebuilders. As well as being invested in companies such as Barratt Developments and Crest Nicholson, Baker holds stakes in other businesses linked to the housing market, including FoxtonsCountrywide and Lloyds.

‘It’s important to bear in mind that housing affordability is still at seven to eight-year lows and, as a proportion of monthly income, capital and interest costs are only around a relatively reasonable 18%,’ Baker explained. ‘Additionally, the number of housing transactions forecast for 2014 is well below peak years.’

Baker also noted that the changes to Funding for Lending would not affect the Help to Buy scheme, which was providing the greater support to housebuilders.

Over the past three years, the JP Morgan UK Dynamic fund has returned 49% compared with 36% from the FTSE All Share index.

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