Morgan Stanley retreats from UK investment over Brexit

12 July 2019

Brexit is making the UK ‘uninvestable’ according to Morgan Stanley’s head of wealth management Nathan Lim, with the country facing the prospect of falling into recession.

When it came to allocations in model portfolios, Lim said the firm disliked Europe as a region and was particularly negative on the UK.

“We have an even weight to Europe, we don’t have a specific weighting to the UK but Brexit is creating uncertainty and making the UK uninvestable at this time. It is crazy that we are this far from the vote and still don’t have a decision.

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“Our economists have said there will be a UK recession if there is a hard Brexit.”

He said the problem was the Brexit campaign had been built on ‘misrepresentation’, with many voters unaware of the complexities Brexit would mean for them.

On the other hand, the firm had moved mildly overweight on Australia after a long period of being underweight and Lim said he was positive on the country for three reasons.

Firstly, Australia was benefitting from steel demand in China, secondly there was a focus on fiscal stimulus and bringing in tax cuts and lastly, Australia’s high dividend-paying companies were attractive to foreign investors.

“While Australia is also experiencing a slowdown, the slowing is mitigated by several factors. Fiscal spending on infrastructure and tax cuts, our proximity to China and its demand for commodities, quality high-yielding shares and the potential for more tax cuts puts Australia in a relatively better position compared with the rest of the world at this time.”

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