Impact of Brexit? The Ftse 100 Index will outperform its peers in the rest of Europe in 2022

Financial Gazette – Santiago

With just a few weeks left before stock market indices close in 2022, Britain’s main index, the Ftse 100, separates itself from its European peers with clearly better performance, benefiting from war In Ukraine and side effects of Britain’s exit from the European Union.

The London Stock Exchange’s Ftse 100 is heading to close the year down 0.71%, while European competitors post sharp declines: France’s CAC 40 Index lost 9.79%, Germany’s DAX futures 12.54%, Spain’s Ibex fell 35.6.90% and Italy’s Ftse fell 13.38. %.

The director of economics and strategy at Bice Inversiones, Sebastián Senzacqua, points out that the predominant factor in the performance of the stock market was the rise in commodities in the first half of 2022.

“The British stock market has a large component of companies that focus on this type of business, such as BP and Glencore, two companies that benefited from higher prices in the first half of the year,” he said.

In fact, the FTSE 100’s internal rankings are led by Bae Systems (52.93%), Glencore (50.93%), Pearson (49.93%), Shell (38.30%), and BP (37.79%). Three of which are core product companies, mainly energy.

Senzacqua noted that the energy sector accounts for nearly 84% of the variance seen in the UK stock market in 2022. The overriding factor behind this was the invasion of Ukraine by Russia, which pushed oil to its highest levels since 2008.

Sterling pound

According to Altafid’s global investment director, Dave Twardowksi, 75% of the income of Ftse 100 companies comes from abroad, which is accompanied by another noticeable factor: the drop in the pound sterling, which on September 26 fell to $ 1069, its lowest value. Since 1985.

This, in a context where the UK voted to leave the European Union in 2016 and completed it at the start of 2020. The latest drops in the pound occurred amid attempts by the previous UK government to agree to an aggressive tax cut plan.

“If we were to relate Brexit to the performance of these indices, then one of the stories is how it negatively affected the pound and how these large companies do business abroad, peg it to the local currency, which increases valuations,” Tvardovsky said.

To illustrate this point, he gives the example of the Ftse 250, a broader index of British stocks in which more than half of the income is generated domestically. The index has erased 20.84% ​​of its capital so far this year.

better perspective

An economist and academic at the University of Los Andes, Javier Mila, confirmed that there is also a huge discount in the British stock market after Brexit, which prompted investors to buy Ftse 100 securities at attractive prices in 2022.

“Brexit has proven that the London market has been very resilient,” Milla said, referring to the initial negative outlook. “The most affected sector was the financial sector, so there were very bad forecasts, and I think these most catastrophic forecasts ultimately did not happen,” he added.

In addition, he considered that future growth prospects would support the value of British stocks, because “the UK is doing better than other big stocks like France, Germany and Italy.”