Leading private bank: Don’t panic about Brexit despite warnings over the economy, the pound, and a leap into uncertainty
A top private bank has told investors not to panic over the possibility of Britain leaving the European Union, despite warnings from UBS that sterling could fall to parity with the euro if UK voters decide to quit the EU.
In a special report, Kleinwort Benson said while a so-called Brexit “presents a lot of uncertainty”, they were “cautiously optimistic” that this could “lead to opportunities to harvest long-run returns by investing in cheap and oversold assets”.
Analysts looked at 16 geopolitical crises since 1950, finding that equity markets were more likely to be up rather than down one year after a crisis.
Mouhammed Choukeir, chief investment officer at Kleinwort Benson, said attempting to predict what would happen after Brexit is “both impossible and unhelpful”.
Read more: EU referendum and Brexit explained
“What matters is having a robust and repeatable investment strategy that ignores the noise and focuses on what counts,” Choukeir said. “That includes paying close attention to valuations, momentum and investors.”
Kleinwort Benson’s report came in sharp contrast to those of UBS yesterday, which said that the chance that the UK will leave the EU stands at around 40 per cent – opening up the possibility that sterling could fall even further.
Sterling fell against the dollar to $1.38 last week, a seven-year low.
Meanwhile, in a separate note out yesterday, analysts at Deutsche Bank warned that if Britain decides to leave the European Union in the referendum on 23 June, it will be “a journey down the rabbit hole” ridden with uncertainty.
Read more: Ignore EU scaremongers: Why Britain would thrive post-Brexit
Deutsche said that in a “benign” environment, initial uncertainty would lead to a front-loading of the bank’s existing bearish GBP/USD forecasts of $1.28 by the end of 2016 and $1.15 by the end of 2017.
In a “worst-case scenario”, sterling may depreciate another 10 per cent, the bank warned.
The City for Britain, a eurosceptic campaign group, launched last night with the backing of CMC Markets founder Peter Cruddas and insurance industry grandee Robert Hiscox.