Brexit: worst-case scenario hits bank and supermarket stocks

A "disorderly" no-deal Brexit would hit banks, autos, supermarkets and aerospace, say Morningstar equity analysts

Alex Morozov, CFA 11 December, 2018 | 6:00PM

Betting on the outcomes of political debates isn't our forte, and the upcoming U.K. House of Commons vote that could determine the direction of the world's fifth largest economy for the foreseeable future is no exception.

As bottom-up, fundamental, long-term-focused analysts, however, we do want to ensure our industry analysis and models adequately account for the macroeconomic and political risks. In this research, we use a worst-case scenario of a disorderly no-deal Brexit to stress test models for our companies with the greatest exposure to the U.K. economy and Brexit.

While we identify a few firms that could face long-term adverse developments following a no-deal Brexit, namely in the automotive space, we also see most disruptions as short term in nature and thus unlikely to materially alter our long-term views. We believe we adequately account for the heightened risk via our uncertainty ratings and see several investment opportunities with the market getting jittery as we get closer to the Brexit Day.

  - source: Morningstar Analysts

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Airbus SE107.41 USD-1.39
Associated British Foods PLC30.40 USD-1.92
Banco Santander SA ADR3.14 USD-2.79
Barclays PLC1.96 USD-1.51
Bayerische Motoren Werke AG ADR28.96 USD-0.21
Danone SA66.86 USD-0.45
HSBC Holdings PLC ADR27.82 USD-2.21
Leonardo SpA7.40 USD6.78
Lloyds Banking Group PLC0.51 USD5.77
Meggitt PLC5.92 USD-7.31
Morrison (Wm) Supermarkets PLC2.49 USD-1.19
NatWest Group PLC ADR4.19 USD-2.10
Nestle SA ADR114.31 USD0.82
Nissan Motor Co Ltd5.29 USD-3.38
Reckitt Benckiser Group PLC86.71 USD0.08
Rolls-Royce Holdings PLC1.44 USD-0.69
Safran SA136.17 USD-1.45
Sainsbury (J) PLC3.22 USD-2.13
Tesco PLC3.27 USD0.93

About Author

Alex Morozov, CFA

Alex Morozov, CFA  Alex Morozov is the director of European equity research for Morningstar.

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