Brexit campaign has exposed faultlines in other EU nations: Pros

Mecklai expects Indian rupee to see some relief rally from people unwinding nervous positions. But the uncertainty could push gold beyond USD 1,300 per ounce, he says.Below is the transcript of Jane Foley and Jamal Mecklai's interview with CNBC-TV18's Latha Venkatesh.Q: What is the sense you are getting despite the poll of polls indicating a razor thin majority for the remain camp, is there still that small chance that it might end up with the victory for the leave guys?Foley: There is probably more than a small chance. In fact if you look at some of the opinion polls, they are suggesting this could be really quite close. In fact if you also look at the bookies, the bookies also are suggesting that it should be quite clear win for the remain camp but of course bookies have also disclosed that what we are seeing is the weight of the money is coming from London on the remain camp. In fact, if you look at the split and breakdown of the number of bets that have been placed outside of London, the greatest volume albeit for smaller amounts is actually for the leave campaign. Meaning that there is a skew in these odds in favour of remain. So, it really could go in both directions.What we are seeing this week is some of the relief rally coming through in asset prices, in sterling for instance we have certainly seen a massive move higher over the last couple of sessions on the anticipation that it will be remain vote. However still there is as huge amount of uncertainty out there. I think Friday could bring some serious volatility through the night on Thursday as those results come out area by area within the UK.Q: What is your sense, tomorrow do you think people will pare down positions as Jane says it is still not 100 percent that the remain guys will win. So, how do you prepare for it tomorrow? Do you think all markets already go towards risk averse assets, towards safe havens?Mecklai: Everyone will be nervous because nobody really knows what will be impact irrespective of the vote. What is more interesting is even if it is a leave clearly sterling will come down. While I think it makes sense for the UK to stay, personally I would be delighted if it were to leave because I am going on a holiday to London next month.My point is even if it is remain the fact is it is going to be close or lets us say if it is remain and it is close, the reality is there is huge number of people in the UK who are uncomfortable with the European Union (EU). What that means politically is, it is going to be very difficult for whoever is in-charge. This is actually the story of the beast all over the place. There is a real polarisation, you are seeing it across the world. So, fundamentally what we are going to see is a rise in volatility.I think gold gives you the key. If gold crosses USD 1300 look out.Q: If the base case appears to be a wafer thin win for the remain guys, it still indicates that there is a lot of dissatisfaction out there in Britain and now the Danes and the Dutch are also asking, do you think that there would be a big flight to risk assets, could we see a huge relief rally or not quite?Foley: I would agree with the position that there is going to be still a lot of volatility. In fact if you look at just the UK to start off with, it is quite likely even if it is a narrow win in favour of the remain, that Prime Minster Cameroon\\'s job is looking very questionable. So, we have political uncertainty, we have got uncertainty about who can be the leadership of the UK government. So, that is one degree of uncertainty. However if we shift the focus to Europe, I think what the Brexit campaign in UK has done is really focused a lot of attention on the cracks that are quite apparent in many different countries. For instance one survey done last week suggests dissatisfaction with the EU. It is greater in France than it is in the UK. We have dissatisfaction, some questions about the position of Danish people within the referendum particularly if there is a Brexit. Sweden there is some scepticism, even in Italy there is some scepticism too. We have some voter dissatisfaction, years of austerity for instance, low wage rises, all of this leading to this position where people are already moving away from centrist politicians towards the left wing, towards the right wing and I do think that amongst all these protest votes, it is a lot of anti-EU sentiment which is really manifesting.So, we have a lot of volatility in politics in Europe and that is before you try and work out what the impact of that will be on the economies.Q: What are the goalposts for the Indian Rupee itself, in case of smooth remain vote what happens to the rupee and if it is indeed a leave vote?Mecklai: If it is remain vote what we will see is still the Rajan’s effect, so there will be little bit a downward pressure. There may be a little relieves that from people unwinding nervous positions. Goalpost is very hard to say. If there is a leave yes the pressure will be more, but I think really the point is we got our special event, which is that Dr Rajan left, so probably RBI will really pullout all the stops to prevent any major decline right now.Q: The Pound, what’s the goalpost, if its leave or if its remain?Foley: We have seen already some of the reliefs early already this week, so scope for upside certainly on relief if there is one immediately, but that is relatively limited I am looking at 1.50 (to a dollar) area for cable, but if there is a leave vote, we are in for Sterling being hammered really quite hard, I am looking for drop maybe as low as something like 1.26 (to a dollar) on cable as the uncertainty pans out and as people really don’t know what will happen either in UK politically and then maybe in Europe to.Q: Where will smart money go if it is remain vote? Do you see it coming to Europe or do you see it now going elsewhere?Foley: I think if there is remain vote there will be a certain activity in the UK. If you look at business surveys over the last few months they have been down. If you look at areas such as commercial property even more residential property we have seen this market impacted, so there will be money coming back into the UK immediately. It will be very difficult to work out beyond underlying trend.Q: I meant globally where will smart money go?Foley: There will be a movement into risky assets immediately, so we will look at stock markets moving higher, emerging markets will perform quite well too, if that would be on immediate aftermath of remain vote, but as the dust settle as people do see that there has been a legacy of this Brexit campaign on politics in Europe, we will have volatility, so don’t think there is going to be strong sustained movements into risky assets necessarily.