Ireland’s Brexit-sensitive stocks rattled before vote

Joe Brennan

Shares in the Irish companies most exposed to Brexit have been rattled in recent days as polls show mounting UK voter support for the campaign to exit the EU.

"Up until this week, Irish shares with UK exposure had actually been trading very well, as had the UK domestic-focused names, but there has been a meaningful reverse in that trend over the last few days," said David Holohan, chief investment officer at Merrion Capital in Dublin.

"C&C, Irish Continental Group, Fyffes, Bank of Ireland and Ryanair have all been weak."

While polls suggest the result of the referendum on June 23rd is too close to call, support for the campaign to leave the EU has been rising. A number of online surveys have tended to lean more towards the Leave side, with a poll for the BT.com website on Friday showing 80 per cent of readers planning to vote to leave the union.

However, the latest betting odds from Paddy Power showed the implied probability of a British vote to stay in the EU at 75 per cent.

‘Choppy ride’

C&C and ICG shares fell 7.3 per cent from their high on Tuesday to the close of trading on Friday, while Fyffes lost 5.5 percent, and Ryanair, 4.6 per cent, and Bank of Ireland, 9 per cent. The Iseq declined 3.8 per cent over the same period.

"It's going to be a choppy ride for investors into the 23rd of June," said Robert Eason, head of equity research at Goodbody Stockbrokers.

“The market hates uncertainty.”

Nervousness across global markets was compounded as German finance minister Wolfgang Schauble warned, in an interview with local news magazine Der Spiegel, of a domino effect of other EU member seeking to exit the currently 28-member bloc, should the UK voters decide to quit. He also said that officials across the euro zone are preparing for Brexit "in order to contain the dangers".

Brexit fears, along with renewed concerns over the US economy ahead of a Federal Reserve meeting next week, sent bond yields from Japan to Germany to all-time lows, as investors piled into what are perceived to be the safest assets.

European shares plunged the most since February on Friday, with the Stoxx Europe 600 index falling 2.4 per cent. The Iseq lost just over 2 per cent.

European equities could lose a quarter of their value in the aftermath of a UK secession from the EU, according to a study from risk-modelling company Axioma.

"There is an assumption that Brexit is not going to happen -- if it happens, no one is mentally fully geared up for it yet," Philip Jacob, one of the researchers who wrote the report told Bloomberg in an interview. "We'll see the equity market really, really move."