Why revisiting the UK-versus-Dutch shares case now ?
Because :
- the Pound / Euro parity has suffered a sharp 11% decline amid rising Brexit fears since November-end ,implying a significant divergence in the forex-unadjusted performances between Dutch and UK shares
- Mr Cameron is facing on 02/19/16 a delicate negotiation in Brussels whose outcome will impact that of the June referendum
- Mr Draghi may unveil ECB’s “bazooka” on 03/10/16
In a nutshell
· The current depression of the pound is reflecting ,among others , some specific Brexit-related worries
· A EU-friendly referendum vote ,and/or rising anticipations of such an outcome ,should logically trigger the removal of the “Brexit discount”
· There are strong reasons to believe that the nation ,like Greece ,will express ,during the vote :
- its preference for a “peaceful” solution
- its aversion for masochism ,as a no-EU vote would imply the emergence of a new dangerous competitor
· The resulting rebound of the Pound would mechanically trigger the facial outperformance of the Dutch shares ,which could be optimized through the implementation of forward sales of Euro / Pound such strategy allowed to extract a 6% performance bonus during the October-November Pound rally