Jun.23 (Dow Jones) -- A British vote to exit the European Union would send global markets sharply lower and some investors are already anticipating potential bargains.
Recent polls point to Britain voting to remain in the EU on Thursday, and markets are mainly trading as if that is now a given. But British polling has been wrong before and the recent rally in referendum-hit assets, such as the pound, means that there is even further to fall if the U.K. does choose to leave the EU.
Should markets plummet some investors are working out which assets, from British banking stocks and real estate to the actual pound, will look cheap.
"There will be so much volatility, there will be so many money-making opportunities" in the event of a Brexit, said Nadir Qureshi, chief investment officer at Singapore-based investment firm Makara Capital.
On Thursday, the pound traded above $1.49, its highest level in six months. But if Britain votes for a so-called Brexit, analysts project a fall of as much as 20%.
That could make the sterling particularly attractive to buyers, according to analysts who say that when the pound has plummeted in the past it has soon bounced back.
"Sterling has tended to rally strongly from undervalued territory over the last 25 years -- in 1996-97, 2009-11 and 2013-15," said Gabriel Sterne, head of global macro research at Oxford Economics, in a research note earlier this week. "Buying sterling on dips after a Brexit vote looks attractive, especially against the euro."
The devaluation might not only make the pound cheap, but assets denominated in the currency.
"Some international investors could find the U.K. less attractive but history shows us others are positively attracted to economies that get a devaluation boost," said Colin McLean, managing director at Edinburgh-based SVM Asset Management.
"There may even be more takeover activity from overseas firms looking for bargains," he said.
The relative strength of currencies matters a lot in mergers and acquisitions. The strong U.S. dollar was credited with fueling overseas merger & acquisitions by American companies last year. Europe was particularly attractive, in part because the euro had fallen from $1.40 to as low as $1.05 between April 2014 and March 2015. Likewise, the big fall in the Brazilian real has driven buyouts from abroad in recent years.
Analysts have already been flagging potential takeover targets should the pound fall. British health-care company Smith & Nephew is regularly mentioned as an acquisition target. The company makes half its sales in the U.S., so a fall in sterling would boost its headline earnings, Bernstein said in a note.
Anne-Sophie D'Andlau, co-founder of Paris-based hedge fund firm CIAM, says that she has been talking to Asian and European family investment offices that are waiting for potential opportunities following the vote, in assets such as real estate.
"You might see Chinese buyers interested in the U.K. all of a sudden," said Ms. D'Andlau.
London-based real-estate brokers have said that Middle Eastern investors are also poised to take advantage of any declines in high-end London property. If the value of the pound falls, British houses will get cheaper for those who hold foreign currencies.
Robert Kiernan, chief executive of Advanced Portfolio Management, said he drew up a list of 15 assets, including U.K. banks and securities in peripheral European markets, that he would have bought if they had become cheap enough ahead of the vote. None have fallen to the levels he has been looking at so far.
But in a Brexit scenario, "you're going to see dislocations that are screaming buys," Mr. Kiernan added. He said he expected "very good valuations" to appear "almost immediately."
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Fecha de publicación: 23/06/2016