According to the most polls for the Brexit vote, both ‘remain’ camp and ‘leave’ camps are moving neck-and-neck. However, the market seems to have factored in a ‘remain’ vote in general.
Michael Every, Head of Markets Research-Asia Pacific of Rabobank, believes the markets globally will not move much till the Brexit vote is out and results would come in early tomorrow morning for Asian markets.
The strength in the sterling pound also indicates that the market does not think there is going to be a Brexit. However, weather will also play an important factor in determining the number of people going for the vote because if it rains heavily the people might just not go to vote, says Every.
When asked did he think India would continue to outperform like it has been over the last couple of months, Every says it depends on the global backdrop and what happens with Brexit vote because if it goes the wrong way then no market is going to look good. It also depends on who will be selected as the RBI governor in place of Raghuram Rajan because although that is not the focus area for now, it will be important once the Brexit event is out of the way. That decision remains key and one is unlikely to see potential upside till then, says Every.
Below is the verbatim transcript of Michael Every’s interview with CNBC-TV18's Anuj Singhal and Ekta Batra.
Anuj: What is your sense, the market is factoring in the remain vote. Do you think that is right to say and if indeed we have a remain vote, do you think the global markets will have a bit of a rally?
A: First of all to be honest we think we can all go home for the day because we are not going to get any results for nearly 24 hours and the market is just not going to move until we do. It is far too important the potential outcome either way and the very earliest that we are going to get any leading result is going to be in Asian time tomorrow morning. So, there isn't really anything for us to do other than to just sit and speculate.
You asked what happens if we get a remain vote. No one's quite sure but a lot of that is already priced into the market. We could see a continuation of what we have seen as a big few having avoided that fate, or it could be that ironically we get buy the rumour, sell the fact and actually we get the reverse. But either way if we do get a remain it is unlikelyto be a particularly big move I would imagine.
Ekta: The pound is already at the highest levels that we have seen in 2016, it is currently at the highest levels. What does that tell you?
A: It is telling you that the market doesn't think there is going to be a Brexit, fairly simply. Also the bookmakers are telling you exactly the same thing. As far as the financial markets are concerned and the bookmakers are concerned this is just very unlikely to happen. It is interesting because the political pundits naturally present to paint much more mixed picture and those with perhaps the greatest experience say that it is too close to call and it is 50:50, depends on turnout and that ironically in a very British way but you Indians can also relate to, depends on the weather. If we get too much rain, people might not go out to vote and it depends who is enthusiastic enough to really get on the way to the polling station.
Anuj: Your thoughts on Indian market which has outperformed a bit over the last couple of months. Do you see that continuing?
A: It really depends on the global backdrop. It really does depend on what happens with that vote tomorrow because if it goes the wrong way no one is going to be looking particularly good to be honest and at the same time it really also depends on what happens in terms of the replacement of the Governor of the Reserve Bank of India (RBI). Judgement isn't really being focussed on that particular area yet because of Brexit story in the background. But as soon as that is resolved one way or the other the attention will zoom back on to India and then till we get that really clarified I don't think there is a lot of potential upside.
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