The expected Brexit-related slowdown is “showing tentative signs of appearing in the data”, says a State Street strategist.
But Michael Metcalfe, head of global macro strategy at State Street Global Markets, also said that long-term investors remained optimistic about the British economy.
State Street’s latest ‘Brexometer Index’ showed mixed signs of institutional investor attitudes in light of the Brexit vote last year and the triggering of Article 50. A fifth of respondents said they would reduce holdings of UK assets over the next six months – though this was fewer than in the last quarterly survey.
Many had no plans to reduce holdings. Metcalfe said: “The long-awaited post-Brexit vote slowdown is showing tentative signs of appearing in the data, but long-term investors remain optimistic. The majority of our respondents, 65%, still have no plans to reduce their holdings of UK assets in the next six months.”
Other findings included:
- 78% recognised Brexit would impact their business operating models, though less than a third thought it likely they would reduce their operational presence in the UK because of it
- 10% said they would increase their presence
- 33% of respondents believed asset owners would decrease their levels of investment risk over the next three to five year
- Yet 28% thought the contrary, expecting an increase in the level of risk amongst this investor type
From a macro point of view, 35% of institutional investors had a positive medium-term outlook for global economic growth – up by 2% from Q1 2017.
Metcalfe added: “The beginning of Brexit would appear to have done little to dent the confidence of long-term investors in the UK, the question now is whether that will last as actual Brexit takes shape during the negotiation process.”
State Street’s Q2 Brexometer Index surveyed 101 institutional investors.
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