Maltese finance experts expect Brexit to stir UK waters mainly

Finance experts appear to agree that the ramifications of Brexit might be chiefly political, and the bulk of economic challenges should arise in the UK markets, according to a press statement published by BOV recently. However, investors with interests in the UK markets must be alert to serve their clients to their fullest potential in times of ambiguity.

The sentiment was discussed at this year’s eTrader+ Investor Clinic — dubbed Brexit – from Black Swan to Grey Rhino — organised by Bank of Valletta (BOV) at the beginning of March. The evening conference focused on the possible consequences on financial and foreign exchange markets on Brexit.

“We consider Brexit, from a macroeconomic level, to be mostly a British problem with the risk of contagion close to zero,” said keynote speaker Christopher Dembik, Head of Macroeconomic Analysis at Saxo Bank, according to the BOV press statement. “Our main worry is the lack of new credit growth, which is the United Kingdom’s top issue for medium and long-term macroeconomic outlook,” Mr Dembik added.

Mr Dembik also said that UK-listed companies that are heavily dependent on their local market in terms of revenue are to be most affected, as UK consumption is slowing and household stress in Britain is increasing sharply.

David Pace Ross, Senior Manager at Bank of Valletta, said he believes the political decision of Brexit will “have long-lasting economic and financial ramifications mainly in the UK and to varying degrees, in the rest of the world,” the press statement reports.

Participants of a panel discussion agreed that investors should be aware of the risks that their investment portfolios carry due to the uncertainties of Brexit continuously fluctuating with the political decisions and economic reviews that occur by the day. High volatility in the FX market is expected to linger on, which could impact portfolios that are skewed toward the British economy or the pound, the press statement concludes.

Steve Ellul, Head of Asset Management at BOV, also emphasised that Brexit is chiefly a political event, which is expected to have an impact on the European, as well as the global, economy and financial markets, albeit to a lesser degree than initially anticipated. He argued that corporate and institutional investors are hedging their risks by mitigating exposures to the pound sterling and UK domestic assets, the BOV press statement adds.

Mr Ellul added that local businesses, especially in the tourism sector, have diversified their dependence away from the UK market, which — together with proactive initiatives by Malta Enterprise — helps Maltese firms to weather potential negative repercussions emanating from Brexit.