The Impact of Brexit on the Stocks We Cover
There's much to consider, but it's not all bad news.
The United Kingdom's June 23 vote to leave the European Union threw global markets into turmoil. According to Morningstar’s equity analysts, the effect of Britain's exit--or Brexit--on the stocks they cover will vary by sector and even by company. Here are some of their takes as of June 24.
The Brexit vote will have wide-reaching implications for our European financials coverage. We plan to lower our fair value estimates for several U.K. banks--including Barclays (BCS)/(BARC), Royal Bank of Scotland (RBS)/(RBS), and Lloyds (LYG)/(LLOY)--and we will review other valuations, such as that of Banco Santander (SAN)/(BNC)/(SANT)/(SAN), which has U.K. exposure. We expect the U.K. system and the European Union to experience substantial uncertainty and volatility as the U.K. seeks to renegotiate trade agreements with other countries, unwind other legal agreements with the EU over the next several years, and deal with the political aftermath of Prime Minister David Cameron’s resignation. We also now see the strong possibility of Scotland seeking independence, causing further turmoil to the overall system and particularly for Edinburgh-based banks Lloyds and Royal Bank of Scotland, which may need to redomicile. While the impact of Brexit is far-reaching, we do see an undervalued opportunity with HSBC (HSBC), primarily because of its relative lack of U.K. exposure and its pivot toward Asia.
Morningstar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.