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UK election fallout: Geneva AM experts react

UK election fallout: Geneva AM experts react

The news of a hung parliament in the UK has forced investors to reconsider their allocations to the country.

With the pound falling sharply and uncertainties surrounding the future of the Brexit negotiations, investment professionals are deciding how best to respond.

Here’s a closer look at reactions from top players in Geneva's asset management industry.

‘Keep calm and carry on’

The outcome of the vote is sizeable but manageable, according to Mike Clements, head of European equities at SYZ Asset Management.

‘The UK election result has sent out political shockwaves, but not enough to rattle UK or European markets, which are trading higher this morning.

‘The result increases the probability Britain will have to make greater compromises with the EU – i.e. more of a “soft” Brexit rather than a “hard” Brexit – which would reduce the chance of acute volatility.

‘The tail risk for markets is if a negotiation impasse creates a political stand-off and subsequent market panic. For investors, we think the best policy is to keep calm and carry on.’

‘UK equities potential remains capped’

UK equities may benefit from a weaker pound but the upside potential is capped, particularly compared to European equities, said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers.

‘Our fears regarding downside risk to sterling have also been realised, with the pound taking a knock on the prospect of a hung parliament.

‘We think that sterling will remain under pressure in the days ahead and are watching the 1.25 level carefully as we noted pre-elections. UK equities are likely to fare better, in our view, helped by currency depreciation.

'However, we believe that upside potential remains capped, especially relative to continental Europe where fundamentals seem to be improving fast alongside a very dovish ECB; continental Europe remains our core value call in the equities space.

‘Broadly, we see this election result as having little impact on global risk sentiment and we remain positive on emerging market local currency debt and equities.’

Taking a pound-ing

Betting that the pound will bear the brunt of the fallout, Gero Jung, chief economist at Mirabaud, said it won’t affect his neutral position on UK equities.

'Higher political uncertainty is certainly likely to impact the beginning of the Brexit negotiations but also fiscal policy,' he said.

'As to investment implications, we believe that the main short-term transmission mechanism is likely to be felt in the currency space, and we re-iterate our view of a weaker Pound sterling.

'While equity markets will react, we do not expect a sharp fall in the short term and do not change our neutral stance on UK equities.'

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