In anticipation of the Brexit: what shift money investors and how they run


The flight to quality

A referendum in the UK, which may be a result of the country’s withdrawal from the European Union, better known as Brexit, concerned investors throughout the world more than the fed meeting, which began on Tuesday, June 14, write to analysts “URALSIB” headed by Irina Lebedeva. The June survey 213 portfolio managers Merrill Lynch showed that 30% of respondents believe Brexit the biggest risk for financial markets now. Two thirds of investors think the UK is still not out of the EU.

Fear of Brexit, investors “flee to quality”, and this has led to the strengthening of the dollar, say analysts at URALSIB. “About the increased demand for the most reliable assets is demonstrated by the fact that the yield on 10-year U.S. Treasury bonds close to 1.6%, the lowest since 2012. Moreover, the VIX rose sharply yesterday, rising above 20%”, — analysts of Sberbank CIB Tom Levinson and Iskander Lutsky. At the same level the last time he was on 29 February, when investors expected the fed rate hike.

The ruble, which is a risky asset that depreciates: 15:00 GMT on Tuesday, June 14, the dollar rose on the Moscow stock exchange by more than 1 RUB to 66.3 RUB.

A referendum on British exit from the EU will be held June 23. According to the latest poll conducted by the sociological service of the ICM, commissioned by the newspaper the Guardian, among the population of the United Kingdom supporters of Brexit 6% more than those wishing to remain part of the EU — 53% against 47%.

The risk for the Euro

“Professional investors evaluate Brexit as a negative event for the markets because it is a decision based on emotions, not on real benefits for the economy,” — said the head of the dealing center Metallinvestbank Sergey Romanchuk, adding that a British exit from the EU will hit the Euro and strengthen the dollar.

If Brexit really happens, it will put pressure on the pound and the Euro, agrees the head of Department of financial analysis “KIT Finance Broker” Vasily Koposov. On Monday, the Agency Bloomberg, citing its own poll of economists wrote that in the event of Brexit the pound may fall below the level of us $1.35, which would be the lowest figure for the last 30 years.

But against the Euro on a long horizon, the pound is even stronger, the analyst of MC “Alfa Capital” Andrew Schenk. Investors may find that the negative consequences for the EU will be stronger than for the UK as to increase the probability of exit from the EU to other countries, says Schenk. “This can lead to the weakening of the Euro against the pound. If the UK will vote against the exit, it will lead to short-term strengthening of the pound to all currencies,” he adds.

Brexit will have an impact on the Russian market, as investors can start to sell risky assets, to which Russia belongs, said Romanchuk. “Maybe the reaction of the Russian markets is not too significant — the last time the ruble and ruble assets, in particular, OFZ are the favorites among foreign investors, as from the point of view of the balance between risk and returns are attractive compared to other emerging markets,” says senior analyst of “Aton” Yakov Yakovlev.

All in the cache

The largest investment funds, fearing instability on the world markets, out of the exchange of assets, preferring to remain in the “cache”, this according to a survey by Bank of America, writes Reuters. In real terms the amount of investment in cash and equivalents (such as savings accounts or Treasury bills) amounts to tens of billions of dollars, and in specific gravity among other assets peaked in 15 years.

The poll of Bank of America participated 213 investment Fund managers, asset managers for a total of $654 billion By early June, the average share of cash in these funds rose to 5.7% (from 5.5% in may — the highest since November 2001. “Norm” is the proportion of cash management in the range of 3.5% to 4.5%. If the amount of “cache” among the assets of the Fund drops below these values, market players begin to sell securities, and Vice versa.

Investors prefer to sell shares and are reluctant to invest in bonds. According to Bank of America, since the beginning of year international equity funds withdrew from around $106 billion, mainly from emerging markets. Part of the funds investors move into government bonds, though the yield of the most stable bonds is near historic lows.

With the participation of Georgi Makarenko