- Chinese investment in the FTSE 100, the UK’s main stock market hits £88 billion.1
- The FTSE 100 hit a 15-day winning streak at the start of May, its longest run since its inception in 19842
- Share buybacks create value for shareholders and demonstrate management’s confidence in the company and attractive valuation
Chinese investment around the globe is vast and has genuine power to move markets. Earlier this month we explored how China’s central bank has been buying up vast quantities of gold, doubling its reserves in the last 3 years and driving the price over $3,000. However, it’s not just the precious metal that the Chinese central bank has been buying. Chinese investment in the FTSE 100 has soared to £88 billion from just £64 billion two and a half years ago. Europe is the leading destination for Chinese investment into developed economies, receiving 53% of their investment into such markets. China now owns 5% of the main UK stock market and the Chinese central bank has a £2.4 billion stake in Shell, a £1 billion stake in Astrazeneca, and large shareholdings in defence companies like BAE Systems and Rolls Royce.1
FTSE 100 v World index, Total Return YTD
Winning Streak
Concerns over foreign influence aside, China’s heavy investment into the UK stock market along with Gold and US Debt demonstrates the defensive nature of the FTSE 100, its attractive valuation, and potential for growth. The UK economy is also growing at an accelerating rate with GDP growth expected to come in higher in 2025 (1.1%) than 2024 (0.9%). Meanwhile, the US’s GDP growth is expected to fall from 2.8% to 1.8%, albeit still higher on an absolute basis.3 This investment has been supportive of the stock market, just like gold prices, and the FTSE 100 is up 8.9% so far in 2025, compared to 3.9% for global equity markets. In fact, the UK FTSE 100 has just broken its record for its longest ever winning streak, up 15 days in a row!2
Share buybacks
One of the reasons that makes the UK stock market so attractive to both foreign and domestic investors is management’s focus on shareholder returns. The US and Japan are developed markets that are slowly cottoning on to the idea of this by dipping their toe in the water of dividends, however, the UK is way ahead in wealth creation through buybacks. This is where companies use their free cash flow to buy back shares from shareholders in the secondary market.
Take Tesco as an example which we own through both passive and active funds in our UK Equity bucket. In the past 12 months, investors have increased their shareholding in the company by 5% simply because Tesco have bought back shares and cancelled them. Since 2021, they have bought back £6 billion of shares, seeing the share count falling 13% and the share price up more than 50%.4
Bowmore portfolios
We maintain our home bias, with roughly a quarter of Equity exposure across portfolios to the UK stock market. This has both dampened volatility this year with the whipsaw US stock market and contributed to excess returns vs global markets, drastically boosting our risk-adjusted returns.
Last week, we switched from Evenlode Income into the Redwheel UK Equity Income fund in Core and Income DPS models. Evenlode employs a Quality-Growth strategy that we don’t think is the place to be right now in the UK. Their holdings trade on an elevated valuation, are more cyclical, and more susceptible to tariffs. Redwheel is a value fund which means it tends to hold more mature, financially robust companies operating in defensive sectors like banks, insurance, oil & gas, and utilities. The robust balance sheets and consistent cash flows make them less volatile and less susceptible to periods of lower growth. With the strong recovery of the UK market from the lows of early April, it should prove a good opportunity to lock in this bounce back and bring greater protection into portfolios without limiting our upside. Everyone will recognise the largest holdings in Redwheel’s fund: Barclays, Shell, Standard Chartered, ITV, M&S.
Source: LSEG DataStream, data as at 22/05/2025
The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a guide to future performance.
Sources:
1 China ploughs £90bn into FTSE 100 companies, Telegraph, April 2025
2 CNBC, May 2025
3IMF GDP Growth forecasts, May 2025
4Share buybacks and beyond, Artemis, April 2025