Why is the stock market-British bond "Uninvestable" voters sell 3.4 billion dollars after "Liz Truss" becomes Prime Minister?

Bloomberg News reported on September 6, 2565 that it has been a rough first month for the UK government as Liz Truss takes over as Prime Minister. There was a sell-off in the stock market and the national bond market. The total value is at least 3 billion pounds, or about 3.40 billion dollars.

Meanwhile, global assets have been hit by central banks' attempts to control soaring inflation. Confidence in the UK has faltered. September's selloff on concerns about government tax cuts This caused the pound to reach an all-time low against the dollar. As intervention from the Bank of England and government climbs amid questions about its credibility

Joachim Klement, strategist at Liberum Capital Ltd., said: “The response we have received from investors is They considered the UK uninvestable. (Uninvestable) as long as there is government chaos.”

Meanwhile, there has been some recovery since the end of September. The FTSE 350 index, which consists of stocks in the export-focused FTSE 100 and the domestic-focused FTSE 250, is down about £7.7 billion. Since the close of 2 September 2565, which is the last trading day before that date. conservative party ruling conservative party Truss was chosen as leader based on data compiled by Bloomberg.

Meanwhile, the market value of gold and inflation-linked gold indices lost around £2 billion during that period. That reflects the global sell-off in bonds. including UK-specific concerns Last month the yield on the 10-year British government bond rose to a record high and exceeded 4% for the first time since 2553.

Investment grade bonds denominated in pounds lost £2.6 billion in the same period. It caused the market value of the Bloomberg index, which tracks securities, to fall to its lowest level since January 2557.

The UK's new prime minister has sought to allay market concerns. with a speech to her party conference in Birmingham on Wednesday. However, the pound fell after the speech as the dollar rose.

And amid confusion over Chancellor of the Exchequer Kwasi Kwarteng releasing his forecasts for the government's finances. The government may be pushed to further adjust policy if those estimates do not reassure markets.

Liberum's Klement said value is beginning to emerge in British stocks. After selling off Despite earnings estimates falling by a quarter, both the FTSE 1 and FTSE 4 will be at or below their five-year average price-to-earnings ratios.

However, Victoria Scholar, head of Interactive Investor at Abrdn Plc, thinks some investors see an opportunity. This is because there is a feeling that stocks are becoming very cheap, attracting opportunistic investors back to the market.

Reference: https://www.bloomberg.com/news/articles/2022-10-06/-uninvestable-uk-market-lost-300-billion-in-truss-first-month