JSE-listed stocks with property holdings in the UK which have slumped since the Brexit vote in 2016, could be in for a rebound as traders price in the chance of the country not leaving the EU this year.
Capital & Counties (CapCo), Intu Properties, Capital & Regional and RDI Reit lost about R30bn in market value immediately following the referendum in June 2016. There has been continued pressure on their share prices since investors sold off on negative sentiment around how Brexit would affect commercial property in the UK. By the beginning of 2018, these four stocks had lost about R107bn.
But the sell-off has eased in 2019 and following the rejection of British Prime Minister Theresa May’s Brexit deal on Tuesday, there is some optimism that some of these losses will be regained with it looking less likely that the UK will leave the EU by its March 29 target date.
CapCo was up 0.36% for the year to date, while Intu increased 1.66%. RDI Reit was 0.19% higher. Capital & Regional was the only UK stock down, shedding some 11.55% for the year to date by the end of trade on Wednesday.
International betting house BetVictor has given a 14% chance of the UK leaving the EU by March 29, compared with 25% the day before the vote.
The pound was up marginally at $1.2871 against the dollar by late on Wednesday. The currency had fallen more than 1% immediately after Tuesday’s parliamentary vote, which rejected a Brexit deal. However, it regained its losses as traders bet the possibility of a hard Brexit were decreasing.
Keillen Ndlovu, head of listed property at Stanlib, said many of stocks were trading at relatively attractive valuations, which would draw investors back to UK stocks. “They are trading at large discounts to net asset value and I think much of the bad news around Brexit uncertainty and job losses is already priced in, so they could re-rate this year as investors buy their shares looking for value.”
Garreth Elston, a portfolio manager at Reitway Global, said even though these UK-based JSE-listed stocks were under less pressure so far in 2019, it was too soon to say that volatility would not return to these stocks.
“As Tuesday’s historic vote on Theresa May’s Brexit deal demonstrated, the Brexit saga and ongoing volatility still have a long way to go,” he said. “While UK eeal estate investment trusts have reacted positively following the vote, it is definitely too early to call the direction that the UK will follow. The past year has certainly been a roller-coaster ride for investors in the UK and it is doubtful that stability will be returning anytime soon,”
Craig Smith, head of research at Anchor Stockbrokers said some people are starting to get back into UK property stocks as they feel they are trading at attractive levels, but he said there is still uncertainty.
“There is still significant uncertainty, in my view, surrounding Brexit, despite Tuesday’s parliamentary vote. UK real estate investment trusts (Reits) and listed property companies, specifically those exposed to retail property in the UK, were negatively impacted by the uncertainty surrounding Brexit and the threat real and perceived of e-commerce and its impact on the physical retail property market.”
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