£10bn Brexit pall over FTSE

Investors have pulled more than £10 billion from UK equity funds since the Brexit vote, as the UK stock market remains deeply out of favour.

Figures from fund manager trade body the Investment Association show investors withdrew a net £428 million from UK equity funds in August, taking total net outflows since the June 2016 vote to leave the European Union to £10.2 billion.

Citywire Money also reports that August marked the first month of retail investor outflows across all funds since the vote, with a net £217 million withdrawn, reflecting also reverberations from the slump in the Turkish currency and continuing slides across emerging markets which pushed the sector into a bear market.

Investment Association chief executive Chris Cummings said: “The uncertainty in the Brexit negotiations continued to be a key factor denting investor confidence in August, with funds experiencing the first retail outflows since the EU referendum result.”

But there is a flipside to this coin. According to City of London Investment Trust manager Job Curtis, the UK could see a “stampede of money” from international investors if it strikes a “soft Brexit” deal with the EU before the March 2019 deadline.

For Curtis, the negativity could quickly clear. “The key barometer of Brexit”, he told FE Trustnet, “is the exchange rate and we’ve got a trade-weighted chart that shows sterling had one of the biggest falls in its history after the referendum, although it has stabilised more recently.

“It swings – when the news flow is good on Brexit, you can see it hardens a bit and then when you get a rebuff [from the EU] it goes down. But I would have thought there is a 70 per cent probability that some sort of soft Brexit will get through Parliament because that is what most MPS would want.”

He added: “UK exposure is at record lows and, as a result, the market is looking very cheap. So you can see what will happen if there is some sort of soft Brexit – there could actually be quite a stampede back into sterling assets.” Swings and roundabouts: hang on to your hats over the coming months.

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