A negative Brexit outcome could provide a buying opportunity but UK's divorce from Europe remains a short-term headline risk, according to HSBC Global Asset Management Canada
Brexit may be a constant on the newswires, but for Canadian investors the UK’s divorce wrangling from Europe provides nothing more than a “short-term headline risk”.
Derek Massey, Head of Portfolio Management, HSBC Global Asset Management Canada, however, also believes a perceived negative Brexit outcome could provide a buying opportunity.
“That’s because when the event happened [in 2016], all markets dropped immediately,” he said. “Even in Canada, we had no direct correlation to what happened, but you could pick a domestic industrial company and it went down the day of the Brexit vote. So the response to headlines would create a buying opportunity for investors.”
Europe’s leaders have indicated that they are now ready to allow negotiations to progress to a potential future trade deal as the protracted and often divisive exit talks with the UK rumble on.
Massey, reflecting on HSBC’s Investor Monthly report which featured the Bank of England’s November interest rate rise, said that any impact felt by Canadian investors was merely down to media rhetoric startling the markets.
He said: “For a Canadian investor – it’s something we are always watching. As a global bank that has its domicile in the UK, Brexit is a big deal for us but for your typical Canadian investor that’s retiring in Canada with Canadian dollars, Brexit is a short-term headline that provides some short-term headline risk. In the scheme of a 10 or 20-year timeline, there is probably not a lot of direct risk to Canadian companies for Canadian investors.
“A number of the public companies that trade on the FTSE 100 are multi-national companies, where a lower sterling would benefit their earnings. So we are seeing, despite all the Brexit rhetoric, a fairly decent performance from the FTSE 100 last year.
“We had a bit of a hiccup after the Brexit announcement, but there is a sit back and a realisation that this is a process that’s going to take a very long period of time, very much like the NAFTA in terms of Canada. We don’t know what the new deal is going to be but all the headlines predicting the worst seem to startle the market and cause a little volatility.
“So if anything I would say that the Brexit news, if it were to come out negative, would be a buying opportunity.”
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Derek Massey, Head of Portfolio Management, HSBC Global Asset Management Canada, however, also believes a perceived negative Brexit outcome could provide a buying opportunity.
“That’s because when the event happened [in 2016], all markets dropped immediately,” he said. “Even in Canada, we had no direct correlation to what happened, but you could pick a domestic industrial company and it went down the day of the Brexit vote. So the response to headlines would create a buying opportunity for investors.”
Europe’s leaders have indicated that they are now ready to allow negotiations to progress to a potential future trade deal as the protracted and often divisive exit talks with the UK rumble on.
Massey, reflecting on HSBC’s Investor Monthly report which featured the Bank of England’s November interest rate rise, said that any impact felt by Canadian investors was merely down to media rhetoric startling the markets.
He said: “For a Canadian investor – it’s something we are always watching. As a global bank that has its domicile in the UK, Brexit is a big deal for us but for your typical Canadian investor that’s retiring in Canada with Canadian dollars, Brexit is a short-term headline that provides some short-term headline risk. In the scheme of a 10 or 20-year timeline, there is probably not a lot of direct risk to Canadian companies for Canadian investors.
“A number of the public companies that trade on the FTSE 100 are multi-national companies, where a lower sterling would benefit their earnings. So we are seeing, despite all the Brexit rhetoric, a fairly decent performance from the FTSE 100 last year.
“We had a bit of a hiccup after the Brexit announcement, but there is a sit back and a realisation that this is a process that’s going to take a very long period of time, very much like the NAFTA in terms of Canada. We don’t know what the new deal is going to be but all the headlines predicting the worst seem to startle the market and cause a little volatility.
“So if anything I would say that the Brexit news, if it were to come out negative, would be a buying opportunity.”
Related stories:
Will Brexit create a new financial hub?
Rise of populism due to global ‘new normal,’ says IIAC head
