SocGen still bearish on cable, recommends staying away from banks

Brexit drove an exodus of money from UK funds, a top broker said.

Since the 23 June referendum vote, and for those UK funds which report their figures to data provider EPFR, assets under management had dropped by $45bn or 9.1% to $450bn, SocGen Head of Global Asset Allocation, Alain Bokobza, said in a research report sent to clients on 14 July.

Equity funds did worst, losing 11% of their AuM and money market funds surrendering 9%.

Bond funds on the other hand were more or less flat, Bokobza said.

To take note of, Bokobza's was a "cautious" estimate and a number of funds only reported their data on a monthly basis, so the "full picture" was not yet clear, the strategist said.

"Also, these numbers do not capture the consequences of last week’s property fund suspensions or assets held by institutional investors that are beyond the scope of the EPFR dataset," he added.

Even with confirmation of Theresa May as UK prime minister, the conditions and consequences of Brexit remain unclear and in our view call for a rate cut from the BoE (although it stayed put today) and potentially more, he said.

Following on from the above, the strategist maintained his target of between 1.20 and 1.25 for cable, adding that he would stay 'tactically' away from banks.

"We stick to a strong negative bias on the UK domestic economy by being short FTSE250/long FTSE 100."