The FTSE 100 continues to struggle for grip around the 7,000-point marker as we exit May. Investor appetite for UK shares remains weak as concerns over rocketing inflation — and whether or not this could lead to huge monetary tightening by central banks — persists.
I for one don’t plan to stop buying stocks for my Stocks and Shares ISA. In fact I think some UK shares are too cheap for me to miss right now. Here are two from the FTSE 100 I’d buy in June.
A FTSE 100 returnee
I believe grabbing a slice of Royal Mail (LSE: RMG) is a great idea as e-commerce goes from strength to strength. Sure, earnings at Britain’s oldest courier are expected to fall around 1% this fiscal year (to March 2022). But this is unsurprising given that the Covid-19 lockdowns that lit a fire under online shopping in the past 15 months look set to end.
Make no mistake: internet shopping volumes are likely to keep growing and growing as technology evolves, companies supercharge investment in e-retail, and consumer habits continue to shift. It’s why I own UK logistics and warehousing shares Clipper Logistics and Tritax Big Box REIT, along with FTSE 100 packaging supplier DS Smith.
Of course Royal Mail — which has just been shuffled back into the FTSE 100 — is another great way to exploit this theme, I feel. It supplies critical distribution services not just in the UK, but across Europe and the US too. Today the company changes hands on a forward price-to-earnings (P/E) multiple of below 12 times. Okay, Royal Mail faces colossal cost pressures as it transitions from letter deliveries to the booming parcels market. But I still think it could deliver excellent shareholder returns in the near term and beyond.
Banking behemoth
I also think HSBC Holdings (LSE: HSBA) shares look cheap right now. City analysts think the Asia-focused bank will record a 172% earnings rise in 2021. This results in a rock-bottom forward price-to-earnings-growth (PEG) ratio of 0.1, way below the bargain-benchmark of 1. On top of this, a prospective 3.8% dividend yield beats the broader 3.5% average for UK shares by a decent margin.
HSBC has some obstacles to overcome in the near term. The most problematic of these is arguably the prospect of ultra-low interest rates being maintained to help the economic recovery. Still, I’d buy this FTSE 100 share as I think it’s a great way to make money from soaring economic activity in emerging markets. BBVA says that Asia will account for 65% of global growth between 2017 and 2027. This is up from 60% in the 10 years to 2021.
These ballooning wealth levels have led to soaring demand for banking products. And while competition is intense from digital banks, I think HSBC still has the clout to compete against these new kids on the block. Indeed, the steps it’s taking to double-down on Asia — a drive that will see it exit the US — convince me that the bank has a bright long-term future.
