Date
30 March 2017
Defying overwhelmingly negative forecasts after the British voted to leave the European Union last year, the UK economy has been holding up well thanks to a weaker pound. Photo: Reuters
Defying overwhelmingly negative forecasts after the British voted to leave the European Union last year, the UK economy has been holding up well thanks to a weaker pound. Photo: Reuters

So much for the forecasts by Brexit bears

British stocks have chalked up a gain of more than 30 percent in the past year. The FTSE 100 index briefly surpassed 7,300 points last month, marking a record high.

The market also maintained a rising streak for 12 consecutive trading days (Dec. 22-Jan.11), the longest in history.

Industrial production rose 2.1 percent in January compared with a year ago. Fourth-quarter consumption rose at a faster pace of 2.8 percent. Demand — domestic or external — advanced steadily.

None of these match the extremely downbeat forecasts economists issued when the British voted to leave the European Union in June.

Once again, this reminds us how reality and forecasts could be totally different.

The strength of UK stocks can be partly attributed to expected benefits from a weak pound as overseas businesses account for a fairly high percentage of large UK companies.

Over a long horizon of 17 years, FTSE has fluctuated broadly between 3,500 and 7,000 points. If the breakout we have seen this time proves to be sustainable, it will mark a significant departure from the long-lasting range-bound market so far.

If that happens, investors should thank the Brexit vote, which at one point created so much phobia that led to a plunge in the pound sterling.

The full article appeared in the Hong Kong Economic Journal in Chinese on Feb. 9

Translation by Raymond Tsoi

[Chinese version 中文版]

– Contact us at [email protected]

RT/RA

Columnist at the Hong Kong Economic Journal

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