Shares of UK investment firm 3i Group advanced on Friday, rising 2.7% to 3,358 pence by mid-morning in London. This move helped the stock recover a portion of its 2.2% decline from the previous session.
Market Context
The rebound occurred against a mixed backdrop for equities. The FTSE 100 index closed down 0.7% on Thursday following the release of UK economic data. Fourth-quarter GDP growth was reported at a modest 0.1%, while business investment fell nearly 3%, increasing market speculation that the Bank of England could implement an interest rate cut as soon as March.
European markets were broadly lower on Friday, with the region-wide STOXX 600 index down 0.3%. 3i's shares traded in a range between 3,310 and 3,363 pence during the early hours of the session.
Investor Focus
As a private equity and infrastructure investor, 3i's valuation is often sensitive to changes in the interest rate outlook. Expectations for lower borrowing costs can buoy the valuations of private assets, though sentiment shifts can quickly pressure listed investment vehicles like 3i.
Investors are also monitoring a potential valuation lag, as private asset values are updated less frequently than public market prices. This creates a risk of delayed markdowns if economic conditions weaken and begin to impact portfolio company profits.
The firm has scheduled a key Capital Markets Seminar webcast for March 26, which may provide fresh insight into its portfolio performance. In the near term, traders are focused on upcoming U.S. inflation data and the Bank of England's next policy decision.
