For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
English
  • English
en
  • en
Filter by theme
Filter by date
Filter by boutique
Filter by theme
Filter by date
Filter by boutique
No posts matching your criteria
Clear theme
Clear all
No posts matching your criteria
Clear date
Clear all
No posts matching your criteria
Clear boutique
Clear all
For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only.
English
  • English
en
  • en
© 2019. BNY Mellon Investment Management International Limited. All rights reserved.
IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
22 August 2019

The Brexit effect?

When we break down the financing of the UK current account deficit for 2018 an interesting trend becomes apparent – direct investment has declined to virtually zero, and the deficit was almost exclusively being funded by portfolio inflows.

 

With all of the uncertainty surrounding Brexit, the decline in direct investment is perhaps unsurprising. Direct investment is long term in nature, and there is little incentive to invest when political and economic uncertainty is so high.

 

But why would investors be pouring money into UK assets?

 

Digging deeper into the data reveals that actually this trend is being driven not by foreign investors but by domestic ones. As UK assets underperform their international counterparts, so UK funds have rebalanced and repatriated assets in order to keep asset allocations unchanged.

 

With the deadline for the UK’s withdrawal from the EU looming, the fact that the UK current account is being financed by potentially capricious portfolio flows raises the risk of an external shock to inflation.

 

David Hooker, senior portfolio manager, Insight Investment.

Please note the content on this website is for Professional Clients only and should be shared responsibly. No other persons should rely on the information contained within this website.

 

Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA), BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA, BNY MFML or the BNY Mellon funds.

Subscribe to updates