I happened to see Christopher Nolan’s latest blockbuster, Dunkirk, at the weekend. The movie portrays the Dunkirk evacuation during World War II, when 400,000 Allied troops were trapped on the beaches of Dunkirk.
The troops were doomed to be wiped out entirely, but crucially, hundreds of ferries, fishing ships and merchant craft were called into service from Britain for the emergency. In the end, more than 300,000 were evacuated, which is hailed as a “miracle of deliverance”.
The British people showed great courage and unity in the face of adversity in Dunkirk, which may cheer Brits today in dealing with Brexit.
The FTSE index closed at 7,372 points on July 31, up 3.6 percent year to date, approaching a record high. The British pound staged a rebound to 1.31 against the dollar. Chinese buyers snapped up London landmarks, with nearly 3.5 billion pounds invested in London properties in the first half of 2017, including the record-breaking 3.5 billion pound deal on London’s Walkie Talkie tower from Lee Kum Kee group last week.
Investor confidence seems to have been restored. Is the Brexit fear unfounded?
According to statistics, annual income per person in the country has remained stagnant for the past 10 years. Many British people indeed earn less than they did before the financial crisis hit.
Furthermore, giant banks hatch plans to move their staff, after the Brexit vote, to Frankfurt, Luxembourg or Dublin. Multinationals which dominate exports in the UK intend to leave the country soon.
London’s housing market has slowed significantly in recent months. Housing prices suffered a sharp slowdown in the second quarter of 2017, rising at 1.2 percent year on year, the weakest rate in five years.
Almost all EU buyers in the UK property market withdrew after the Brexit vote. Low oil prices are curtailing the purchasing power of Middle Eastern and Russian investors. The Chinese government launched a clampdown on capital outflows and overseas investment, hindering Chinese property buyers in the UK. Will demand for UK housing stay strong?
A rally in the British pound may not be able to stay for long. The US dollar tripped as doubts over Trump’s tax reforms and fiscal unnerved the markets, contributing to the recent rebound of the British pound.
However, investors should take note that the US Federal Reserve will begin raising rates and trimming its balance sheet at a pace faster those of the European Central Bank and Britain’s Central Bank.
And considering that the dollar is massively oversold, the pound against the dollar has likely peaked. A weaker pound would give a further boost to the share price of UK-listed HSBC.
In Dunkirk, the sacrifice of the French army during the British evacuation was slighted in the movie. Indeed, the British army didn’t win the war alone; it was the US’s involvement that ultimately put an end to the war. Allies contributed in large part to Britain’s victory.
Likewise, without the EU allies after Brexit, what will happen to the UK economy?
This article appeared in the Hong Kong Economic Journal on Aug. 1
Translation by Ben Ng
[Chinese version 中文版]
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