UK prime minister Theresa May's call for snap election on June 8 has triggered contrasting views from investment experts within the fund management and private banking industry, Citywire Asia has found.
‘Appraising the UK investment landscape in this context suggest to us that equity assets remain attractively priced – especially in the context of a robust UK and strengthening global economy,’ Steven Andrew, multi-asset portfolio manager of M&G Investments, has said.
‘With that in mind, we would look to add to our UK equity positions should political-inspired volatility offer material discounts from here.'
However, the wealth management group at Standard Chartered Private Bank holds a different view on UK equities.
‘We remain cautious on UK equities,’ the group said. ‘There has been a divergence in equity market performance as GBP returns have outperformed USD returns.
‘We believe that the risks for the GBP are increasingly skewed towards the upside, which would reduce the tailwind for corporate profitability going forward.’
The group believes that positive momentum for the sterling will continue near-term. ‘We remain bullish on the GBP as technical indicators remain constructive, given that speculative short positions were at record highs. GBP/USD broke above the 1.265 resistance level which suggests the GBP could rally further near term.’
In the same vein, M&G 's Andrew noted the sterling's rally subsequent to the announcement of an early election.
‘The coming days will likely yield many explanations as to what sort of result this suggests is being priced-in by markets. While making for interesting copy and fuelling some debate, rationalising price moves in such a way is usually unhelpful from an investment perspective.
‘The facts around the UK’s comparative growth, inflation and interest rates situation, combined with the sharply weaker path already followed by sterling over the past year, suggest the currency is pretty cheap and could rise from here.’
Impact on Asia
Pieter Jansen, senior strategist of NN Investment Partners, echoed the view. However, he said, 'the sterling exchange rate may continue to respond to changes in the likelihood of how May does in the polls and what the alternative could be.'
He told Citywire Asia that the impact for the Asian markets will be minimal from the snap elections call by the UK prime minister.
‘It is, however, unlikely that global markets will respond strongly to the UK outcome. A softer Brexit could be a slight positive surprise for markets. Much more important in the near term for global markets is the outcome of the upcoming French election.’