Look to equities for growth potential

ALTHOUGH the UK remains on a slow and bumpy road to recovery, equities should offer good growth potential next year, according to Fidelity Worldwide Investment’s UK portfolio managers.

According to Fidelity, the overall picture for UK equities is more positive with “an abundance” of undervalued companies being ignored.

Alex Wright, manager of Fidelity UK Smaller Companies Fund and Fidelity Special Values, said: “With the market as a whole trading on a significant discount to long-term averages, particularly in the small and mega cap sectors, I find myself generally positive about the prospects for equities in 2013.

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“ECB governor Mario Draghi’s open-ended commitment to buy European government debt, has in my view, significantly reduced risk in the European financial system for the time being. Given that volatility in recent years has been at least partly driven by concerns about European debt markets, this development should be positive for markets.

“That said, unfortunately I think it is unlikely to be plain sailing from here, with a number of potentially serious economic obstacles on the radar, most notably the stalemate in the US with regards to fiscal policy, geo-political instability in the Middle East and social unrest in Europe. The good news here is that I have been able to find plenty of undervalued companies in different parts of the market.”

Aruna Karunathilake, manager of Fidelity UK Select Fund, and James Griffin, manager of Fidelity MoneyBuilder Growth Fund, predicted that a series of mini crises could occur in 2013 which will have a “hiccup effect” on the UK’s recovery.

However, they believe this volatility could create opportunity for equity investors.