UK-focused stocks have suffered the biggest hit on the FTSE 100 since the Brexit vote one year ago today.
Companies directly or indirectly servicing the UK have been hurt by a weaker pound, driving up import costs, and subduing consumer demand impacted by rising inflation.
Sterling against the dollar has tumbled to US$1.2629 from a peak of US$1.4877 on 23 June 2016 when the UK voted to leave the European Union.
Telecoms giant BT PLC (LON:BT.A) is one of the worst performers over the year, dropping almost 35% in price, albeit hurt by other factors as well including an Italian scandal and pension scheme worries.
Broadcaster ITV PLC (LON:ITV) is another victim of the vote, falling almost 20% since the referendum, as advertisers have tightened their purse strings on Brexit uncertainty., while postal delivery firm Royal Mail Group PLC (LON:RMG) is down more than 18% in the past 12 months.
DIY retailer Kingfisher PLC (LON:KGF) also suffered, hurt by its French exposure, dropping 15% over the period, while high street clothing retailer Next Plc (LON:NXT) shed 24%.
Outsourcing firm Capita PLC (LON:CPI), which was demoted from the FTSE 100 in March, had the biggest decline over the year, down over 38%. Others demoted from London’s top tier index after big Brexit-vote related falls include Hikma Pharmaceuticals (LON:HIK), down nearly 28% in the last 12 months, Dixons Carphone PLC LON:DC), down 29.5%, and Travis Perkins PLC (LON:TPK) off 21.5%.
FTSE 100’s top performers since Brexit
On the upside, however, miners Glencore PLC (LON:GLEN) and Antofagasta PLC (LON:ANTO) have been the main beneficiaries of the Brexit vote on the back of a slump in the pound, with the dollar-earners shares rising 80% and 71% respectively over the past year, albeit having been depressed before then by commodity price weakness.
Mining shares have been lifted by a 15.6% pick-up in gold prices over the year.
Global lender HSBC Holdings PLC(LON:HSBA), which derives much of its earnings from Asia and the US, has shot up 51% helped by favourable exchange rates.
While Brexit has certainly had an impact on FTSE 100-listed stocks, Hargreaves Lansdown said there were also other factors at play.
For instance, drugmaker Hikma has been hit by a delayed failure to get US approval for its generic version of the blockbuster drug Advair.
Meanwhile, equipment rental company, Ashtead, has been boosted by US President Donald Trump’s plans to ramp up industrial spending. Its stock has surged 52% across the year.
“Overall while Brexit, and particularly the fall in the pound, has set the tone for market performance, there have still been plenty of other factors which have played their part in stock price movements,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
“And while domestically focussed stocks have undoubtedly been hit by Brexit, many have seen a significant bounce in their share prices since the days and weeks immediately following the referendum, when there was even greater concern around the fate of the UK economy,” he added.
But overseas markets have far exceeded the UK’s performance
Overall the FTSE 100 has gained 22% in value, including dividend reinvestment, or 18% excluding dividends, in the year since the Brexit vote, while the FTSE 250 has jumped 17.2% and the FTSE Small Cap index has gained 26%.
But overseas markets have far exceeded the UK’s performance, including the S&P 500 in the US, which has jumped 38.2% on the year. Germany’s DAX 390 has soared 43.7% and France’s CAC 40 is up 40.7%.
“Overall the UK stock market has performed very strongly since the EU referendum, though it’s actually a laggard compared to the return UK investors have received from overseas markets,” said Hargreaves' Khalaf.
“That’s because weaker sterling has been one of the key drivers of the Footsie, and that currency boost is even more powerful for overseas markets, when returns are converted back into pounds and pence.“
Khalaf pointed out that the strong performance of the mega caps has led to a further concentration of the UK benchmark index in the very biggest stocks.
He noted that the biggest 10 FTSE 100 stocks which accounted for 42.7% of the index on 23 June last year, now account for 46.1%.
The analyst added: " Or to look at it a different way, half of the index by weight used to be comprised by the biggest 14 companies, it’s now comprised by the biggest 12. There’s no doubt the index was already concentrated, but it’s become more so as a result of market movements since the EU referendum.
"The result is, for the time being at least, movements in the headline FTSE 100 index will be even more heavily influenced by the performance of the big stocks at the top."
Khalaf concluded: "A year after the referendum, Brexit talks have now finally begun, which may cause some to reassess their investment strategy. However, the performance of capital markets over the last year tells us that the financial effects of Brexit are about as predictable as the British weather."