Britain’s new Labor government has unveiled its first budget plan, which includes tax increases worth £40 billion ($51.8 billion) and larger spending plans. Wall Street and City analysts have identified several stocks that could benefit from the measures announced on Wednesday. Investment banks also said stocks that fell ahead of the budget may now rise on better-than-expected results. Online Gambling Shares in listed UK gambling companies have fallen sharply in recent weeks amid media reports that the UK government plans to raise taxes on such companies to raise around £3 billion. Gaming stocks have since surged as no such tax was announced. “We expect stocks such as Evoke and Entain, which have been hit hard by negative media speculation, to rebound sharply following today’s announcement,” Investec analyst Roberta Ciaccia said in a note to clients immediately after the budget announcement. Other companies, e.g. Listed Flutter and London-listed Rank Group also rose after they did not detail new tax measures. Civil engineering and infrastructure group Balfour Beatty is expected to benefit from the “sentiment” set by UK Finance Minister Rachel Reeves, according to investment bank Jefferies. “The UK budget is a clear signal that the new government is committed to investing in infrastructure to support wider growth. This is good news for Balfour Beatty, which generates around 60% of its revenue in the UK and has operations in the transport and power sectors in a leading position,” Jefferies analysts led by Graham Hunt said in a note to clients. Analysts expect Balfour Beatty’s share price to rise 18% over the next 12 months, but warned that while the budget improved the company’s prospects, it would not have any concrete impact on Balfour Beatty in the near future. They said: “There are currently no major changes to the plans but the mood is good and we point to further funding for HS2, Sizewell C, Carbon Capture, Hydrogen, Roads and Rail and Defense as future opportunities.” Investors in UK banking shares will also be relieved that there are no new tax measures specifically targeting lenders. “The main takeaway from the budget is the lack of additional bank-specific taxes. In fact, the sector is barely mentioned. Normally we would look at a 14% (cost of equity) reduction for banks for this,” Jefferies analysts said. Asset managers’ UK pension contributions now fall under the inheritance tax regime, which is set at 40%. Jefferies said the change could mean wealthy retirees could use up their pensions first and then tap into other savings to minimize the amount of tax they pay. “It’s impossible to draw conclusions without having a detailed look at the asset mix and size of clients, but in general smaller investors are less affected (PBEE, AJB’s D2C platform, HL). Larger investments Investors may be more affected (parts of Quilter, AJB advised clients, IHP, STJ). Analysts at RBC Capital Markets agreed, saying the budget “does not include significant surprises related to the wealth sector.” The investment bank said any changes to the rules would be a “relatively benign outcome for the industry” and remove “event risk” from stocks. The Alternative Investment Market (AIM), the primary market for shares listed on the London Stock Exchange, is threatened with the removal of tax breaks, according to media reports ahead of Wednesday. Ultimately, the UK government reduced tax relief by 50%, far less than feared. Investment bank Canaccord Genuity has previously identified a number of stocks that have sold off in anticipation of sweeping tax hikes. Ashtead Tech, a specialist rental company that floated on the AIM market in 2023, has seen its revenue double in two years, although the stock has fallen by a third in the past three months. Canaccord Genuity said the company’s shares could rise more than 45% over the next 12 months. “We believe the weakness of the past few weeks provides an opportunity to understand the story: Ashtead Tech is a specialty leasing company servicing the offshore energy industry, primarily oil and gas today, but with a large and rapidly growing footprint in offshore wind. position,” the bank’s analyst Alex Brooks said in a note to clients on October 29. Aquis Exchange is another AIM-listed stock that could benefit from better-than-expected results. Canaccord analysts noted that the company is in its “strongest position ever.” However, the stock has fallen 10% this year, with a sell-off that has intensified over the past three months, sending shares down about 35%, according to FactSet data. RBC also noted that shares of wealth managers Brooks Macdonald and Tatton Asset Management, which trade on the alternative investment market, could “ease near-term technical pressures.”
Analysts say these stocks could benefit from announcement | Real Time Headlines
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