Killik & Co has tipped UK equities to continue climbing in 2010 as a result of loose monetary policy and low yields on cash and government bonds.

In the company’s annual ‘investment themes for the year ahead’ report, it says that while it expects UK equities to continue upwards, there are a number of uncertain factors, such as the outcome of the general election, the timing of an increase in interest rates and the direction of the US dollar, which could have a negative impact.

Mick Gilligan, head of research at Killik & Co, said investors should expect economic growth in the UK to remain subdued and advised investing in companies that are able to grow their sales in spite of this economic climate.

He explained: ‘In particular, we would highlight technology (Autonomy and Imagination Technologies) and emerging markets/commodities (BG Group) as areas likely to experience superior growth.

‘Funds that have good exposure to higher earnings growth include Polar Capital Technology Investment Trust, AXA Framlington UK Select Opportunities and Lazard Emerging Markets.’

Gilligan says that strong companies that are well placed to take market share from rivals such as Pearson, Man Group and Barclays continue to be good bets. 

The funds with the best exposure in such companies are M&G Global Basics, Findlay Park American Smaller Companies and First State Asia Pacific Leaders.

Gilligan added that there are plenty of high-quality equities  that continue to offer yields in excess of cash and bonds, such as GlaxoSmithKline, Imperial Tobacco and First Group.

He explained: ‘In addition, their dividends are growing and provide protection from inflation over the long term. Funds that offer a yield above that of cash and bonds and good prospects for long-term capital growth include First State Asian Equity Plus, Invesco Perpetual Income and Veritas Global Income.’