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By Thyagaraju Adinarayan
LONDON, Sept 13 (Reuters) - Credit Suisse has turned bullish on UK stocks, especially those with international exposure, as the chances of the country crashing out of the European Union fall and some equities look cheap compared with foreign counterparts, it said on Friday.
Credit Suisse is the first major bank to change its view on UK equities amid rising hopes the country will avoid a no-deal Brexit on Oct. 31 after Prime Minister Boris Johnson’s hardline stance suffered a series of defeats in recent weeks.
Since Johnson won the top job in July, Britain’s Brexit crisis has spun more furiously, leaving investors and allies bewildered by an array of decisions that have pushed the once stable political system to its limits.
UK equities have been widely shunned by investors since the country vote to leave the trading bloc in 2016.
As recently as three weeks ago, the Swiss bank said it was neutral on UK equities because it needed more visibility over Brexit. That’s now changed due to the reduced likelihood of a no-deal Brexit.
“Given the most recent developments (...), we believe that investors should now be overweight of the UK, but more importantly in USD terms and still selectively,” its analysts said.
The note came as sterling jumped to a seven-week high against the dollar as investors cut their sterling short positions on the receding risks of Britain leaving the European Union without a negotiated arrangement.
The Swiss bank now expects the UK blue-chip index FTSE 100 to touch 7,600 points by mid-2020, a 3.5% gain from current levels.
“We would buy UK international earners in dollar terms that are cheap versus their peer group,” Credit Suisse analysts said.
In dollar terms, the FTSE 100 is the only major index to have fallen since Brexit, while rest of the world has seen double-digit percentage gains.
Credit Suisse said Johnson Matthey, Elementis , Rentokil, Relx and British American Tobacco were some of the attractive names with international exposure.
Reporting by Thyagaraju Adinarayan; Editing by Josephine Mason and Mark Potter