Markets have methods to survive unlikely Corbyn win

Jeremy Corbyn scares the City of London witless. UK Prime Minister Boris Johnson only attacks business in frustrated asides. Corbyn, hard-left leader of Labour, last week peppered a speech launching his party’s election campaign with attacks on named businessmen.

There is a subtler retaliation for City investors than calling Corbyn “not only a liar but clueless”, as sportswear retailer Mike Ashley did: make money from this enemy of capitalism. The challenge is tougher than profiting from Johnson. The Bunterish ex-mayor has made better progress towards a Brexit deal than expected. Shares have soared in companies with heavy exposure to sterling and the UK economy. The stocks of property groups Land Securities and British Land are up by almost a third since August, for example.

The problem with Corbyn is multilayered. He is unlikely to win power, unless pollsters are more than usually inaccurate. Even if he does, he would struggle to trash business as comprehensively as promised. Expropriations proposed by Labour leaders, valued at more than £350 billion ($704b) by Lex, are probably illegal. And Corbyn is too much of a ditherer to make the seizures.

Nevertheless, short positions in Labour’s bugbear businesses would still do well if the party rises in the polls. These include Severn Trent, United Utilities, National Grid and Centrica. Labour has made vague threats to “requisition” properties for housing. Real estate groups could therefore drop further than their lack of foreign earnings would alone justify. The spread between gilts and Treasuries would widen. Panmure’s Simon French estimates additional issuance of £250b is possible.

Long positions would include multinationals with limited UK exposure. These are best placed to switch their listings out of London to avoid share grabs.

Manufacturing groups look safest from attack, given Labour’s attachment to the sector. The conclusion? The markets can deliver a harsher critique of Corbyn than Ashley ever will.