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Scotland ‘Yes or No’ – Why & How you need to hedge the FTSE 100 / 250 & Gilts

Wednesday 17th September '14

  • Scotland’s referendum on independence is too close to call. Markets disliking uncertainty are putting pressure on UK’s currency and credit markets, driving downside risk to UK equities.
  • Secession weakens the economic fundamentals for Scotland, exposes the rest of the UK to unwarranted credit risks and diminishes London’s political clout. UK mid and large cap equities are at risk of being de-rated. 

Nossek said: “Until clarity emerges well after the vote on Thursday 18 September, it may be prudent for investors to hedge their exposure to UK debt and equities.”

The latest YouGov survey, conducted on behalf of The Times and The Sun, puts the No vote at 52%, with the Yes vote at 48%. 

With the Yes camp again leading by 4%, this is a reversal from Yougov’s previous survey (held between 2 Sept and 5 Sept) when the Yes camp stood at 51%, to lead the No camp by 2%. The final results, due around market opening on Friday, are now too close to call.

The No camp’s lead has dissipated since August, with a negative impact on UK financial markets. Whether permanent damage has been done to both safe haven and risk assets in the UK is too early to tell, but the pound has lost 1.7% against the dollar in August and 2% in September so far.

Read the full report here.