Citi optimistic about UK stocks as a hedge against geopolitical risks, downgrades Japanese stock market rating

格隆汇 March 2｜Citigroup strategists stated that with the outbreak of the Iran war, UK stocks can serve as an effective tool to hedge against a new round of geopolitical turmoil. The team led by Beata Manthey upgraded the rating of UK stocks in their global equity strategy from "underweight" to "overweight." They believe that the UK stock market's exposure to commodities and defensive industries shields it from the impact of rising oil prices. The team wrote in their report that the Iran conflict has brought new uncertainties to risk assets, and the UK market's heavy weighting in commodities, defensive sectors, as well as aerospace and defense industries, therefore plays an effective "geopolitical hedge" role in equity portfolios. Meanwhile, Manthey and her team downgraded the rating of Japanese stocks from "overweight" to "underweight," as the Japanese stock market tends to perform poorly when oil prices rise.