How has the referendum affected the markets?

After months of campaigning, by both the “Better Together” and the “Yes campaign”, we finally have the result. Whilst it was still pretty close, was it as close as we were all expecting? Looking back at how the markets were affected has been quite interesting, from a fall in the pound in the beginning of September to the threat of many big businesses moving south of the border if the result wasn't to their taste. Lloyd’s Banking Group finished the 8th September down 3%*, along with Standard Life and Scottish and Southern Electric (SSE), who were down 2.7%* and 2.38%* respectively, when the “Yes” campaign took the lead. Were investors starting to panic? Would the situation start to snowball out of control? Would the pound be worthless by the end of the referendum?

The only thing that could be guaranteed was investors acting on their own financial interests, regardless of what the politicians did.

Since this time, and the result, the share price in a number of banks has now recovered.

There were particular concerns for both campaigns regarding the referendum. We look at some of these below.

Property

A number of estate agents reported a slump in business, claiming that buyers were put off making offers north of the border, largely due to potential mortgages remaining in sterling. Figures released by the Office of National Statistics just after the referendum showed that the average house price in Scotland had reached an all-time high, hitting £198,000 in July 2014, 7.6%** higher than 12 months ago.

Banking sector

Royal Bank of Scotland (RBS) has bounced back as the pound hit a two-year high in Asian markets, and companies with strong Scottish ties pulled the stock market higher last Friday. There is, however, uncertainty about the political implications of the referendum and further devolution.

Having said that, RBS ended 3% higher on 18th September, even though the FTSE 100 closed up 0.275%. The following day, however, as trading got underway, the pound started to dip. By the end of the trading day it was down 0.48% against the dollar at £1.6322.***

Guy Ellison, head of equities at Investec Wealth & Investment said that any initial relief had been “tempered by a lack of clarity on the real consequences of further devolution of powers to all the UK regions”.

Whisky

There has been a drop in whisky sales, which manufacturers blame on a cut in China's extravagance and a slow-down in markets.

According to The Guardian, sales have fallen 16% in the US, 46% in Singapore, 19% in Brazil, 27% in Mexico and 22% in Germany.^

Oil and Gas

Petrofac, the engineering, fabrication and construction contractor, which holds shares in SSE has explained that the “No” vote has removed a significant risk that has been weighing down on the shares. Petrofac see no reason why SSE'S shares should not start to re-rate towards the 1815p base rate, around 20%^ above current levels.

Savings

A lot of people have pension schemes which are linked to stock markets. There was great concern before the referendum, about a fall in the value of the FTSE, which would have been likely to reduce the value of pension pots and other savings, like stocks and shares ISAs.

Following the result of the referendum, you may now be interested in opening an ISA, pension, or a “rainy day” saving. For more information on the services we can offer through the Chelsea FundStore, why not give us a call in the office, or click on the links below.

Sources:

* BBC News, Scotland Politics 16th September 2014
** This is money, 19th September 2014
*** The Guardian, 19th September 2014
^The Guardian, 22nd September 2014