Sterling saw its biggest drop, equities fell and gold jumped after Britain’s decision to leave the EU reverberated across financial markets. We speak to five experts and find out how the historic move could affect your personal finances in the UAE.
Look for the silver lining: Jessica Cook
"Over the short-term, the vote will likely lead to declines in global shares and other assets, yet indiscriminate selling could translate into opportunities with some regions marginally affected by the UK’s exit from the EU. History has shown that investments made at times of pessimism can have the greatest chance of success.
"There has actually been a spike in the gold price and, in the short-term, many foreign investors will move fast to capitalise on the current FX volatility.
"The out vote is only the beginning of what will be a lengthy process and includes considerable uncertainty going forward. Economic forecasting and the magnitude and volatility of the British pound’s fall will likely dictate further responses.
"The market is likely to be volatile over the coming days and further falls are possible. However despite short-term turbulence, the hope is that the longer-term trajectory for the UK is onward and upward."
Cook is Private Client Adviser at AES International
Period of uncertainty but don't panic: Brendan Dolan
"In the weeks leading up to the vote, the changing sentiment towards a leave vote saw the UK equity market weaken, with GCC investors fleeing towards safe havens. It is almost inevitable that this sell-off will continue as we enter a period of extreme volatility and uncertainty. As history has shown, usually the right thing to do - and often the hardest thing for an investor to do - is avoid the temptation to change their portfolio and sell when prices are already depressed. Other international markets may also be affected by the risk of contagion from the out vote, but exactly how this might materialise remains to be seen.
"What we do know is that the UK’s EU membership referendum needs to be seen in the context of other macro events and risks such as the US presidential election and the future trajectory of US monetary policy. With the dirham pegged to the dollar, GCC-based investors could see their currency strengthen in value with Dh4.5 a pound not inconceivable."
Dolan is Regional Director for the Middle East and Africa, Old Mutual International, part of Old Mutual Wealth
Capitalise on buying opportunity: Andrew Prince
"Global markets like certainty and therefore the Brexit result creates volatility. There has already been a short-term sell-off in stock markets and sterling has fallen. This happens because panic generally sets in and investors lose their nerve selling at the bottom. However, many savvy investors will see this as an important buying opportunity.
For example:
FTSE 2013 – May: 6,723; June: 6,116; July: 6,630
Had you bought in May and sold in June you’d have made a 9 per cent loss.
Bought in June and sold in July, you’d have made 8 per cent profit.
FTSE 2014 – Sept: 6,807; Oct: 6,310; Nov: 6,751
"As above, selling in October resulted in a 7 per cent loss whereas buying in October and selling in November meant a 7 per cent profit.
"For expats paid in dirhams, this could be a stunning opportunity to either accelerate the speed with which you repay your mortgage or indeed look at adding to your portfolio. Why? sterling dropped 9 per cent on Saturday meaning it will cost you less however, I would advise you to forward fix your rate to lock in that saving.
"I suggested a year ago to drip feed into gold when it was at $1,050/oz. A flight to safety saw it climb to over $1,300/oz this week, a 24 per cent gain."
Prince is Financial Planner, deVere Acuma
Expect flight to safety: Gary Dugan
"The sterling at risk of slumping to $1.20. Yen to remain strong, Euro under pressure. We expect global equities to fall to their February lows representing 10-15 per cent downside from yesterday's closing prices. A flight to safety may drive the US government 10-year bond yield to 1.40 per cent. Gold has $1,400 in its sights. Credit markets are at risk of higher spreads on global growth worries. UK sovereign credit rating faces a downgrade."
Dugan is Chief Investment Officer, Emirates NBD
Keep calm: Siddarth Bhatia
"If right-wing political tweeters are to be believed, the EU project is over. However we, as long term investors must not panic. We are seeing the FTSE100 down 8.5 per cent as of this writing and could see some more follow through moves. The pound is at multi-decade low - but again there are two sides to all of this. UK exporters will now do well, and it remains to be seen really whether Brexit is going to actually be a negative for the economy as a whole. As of now, specifically today, we must wait and watch for developments and not place any hurried investments either to buy or sell."
Bhatia is Chief Investment Officer at Guardian Wealth Management
