Businesses that make most of their profits abroad after the British exit from the EU voted on the influx of investors at the expense of domestic companies that rely on sale in the UK, according to two separate analyses of the London stock exchange.
Within two years from the time of the referendum of the EU, the gap between the share performance of companies which operate mainly in the UK and those that export earnings from foreign subsidiaries has almost reached a record level, said accounting firm KPMG.
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This trend has left the UK stock market lags behind the US and Continental Europe, which soared over the past two years. Investors lifted the FTSE 100 to record levels, but the index is still only a few hundred points above its peak in 1999, when the Dow Jones is 24,580 – more than double the level at the turn of the century.
The latest KPMG’s FTSE outlet UK detailed analysis, which tracks companies from the FTSE 250 and FTSE 100, found that investors favoured companies, which took advantage of the weakness of the pound, which fell by 11% against a basket of currencies after the vote the UK out of the EU.
KPMG notes, the setup of companies that earn more than 70% of their income from abroad, in the UK 50 index and compared it with 50 companies that receive more than 70% of their income from the UK.
Yael selfin, head of KPMG’s economist, said the UK 50 4% below its level prior to the referendum, but not in the UK 50 acquired 35% over the same period.
“The forecast for next year may be more mixed. While the pound is expected to remain relatively weak, the prospect of an escalation of the trade war may suffer a significant portion of our FTSE 50 non-UK voters,” she said.
“These companies are also potentially more vulnerable to the edge of the cliff the British exit from the EU, as they usually have a supply chain that is more closely integrated with the EU.”
Laith Khalaf, senior analyst at stockbroker Hargreaves lansdown Smoking, said that the greatest influence on the retail sector.
“The retail sector is experiencing pressure from higher labor costs, low attendance and constant growth of electronic shopping. Currency crunch doesn’t cause these problems, but complicated life in already difficult times for street retail,” said he.
“The most effective inventory, so as to vote for leaving the UK have a distinct metallic tint and because mining companies have benefited from a combination of lower sample and higher prices for commodities.”
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More broadly, investors in the UK prefer to buy shares in mainland stock markets and new York.
“Investors have invested a record amount in funds later, but they were pulling a considerable amount of the UK. After the referendum the EU was announced that £7.9 billion was withdrawn from equity funds in the UK against the background of £61 billion is invested in mutual funds in General,” said Khalaf.
“Special sources for exemptions from the U.K. occurred during the referendum and General elections next year, which suggests that the Exodus of investors from the UK was due to political uncertainty”.