Capital markets are set for a surge of adrenalin on Friday after Boris Johnson’s Conservative Party secured a thumping majority in the UK’s general election, removing a huge weight of uncertainty about Brexit.
The solid victory for the Conservative Party in the UK election has given investors a burst of confidence.
Nerves in the foreign exchange market had been tense in the run-up to Thursday night’s UK election, with a rumour that Labour would win more seats than predicted sparking some volatility in the FX options market.
 wins in UK election 13dec19 from PA 230x150.jpg)
The Conservative Party’s strong win in Thursday’s general election is thrilling the UK’s financial sector and business world on Friday.
There were audible sighs of relief on equity capital markets desks on Friday morning as Boris Johnson delivered a hefty Conservative majority in the UK general election. Bankers are now prepping for a busy 2020 and a solid UK issuance calendar. A state block trade of Royal Bank of Scotland shares is among the most anticipated chunks of business for next year.
There are fundamental reasons for UK assets to be revalued upwards, analysts believe. The powerful majority achieved by Boris Johnson's Conservatives tilts the UK towards a Trump-like market-friendly, fiscally generous patch. But the reality of Brexit cannot be ignored for long.
With a Conservative majority in Parliament meaning the UK will almost certainly leave the EU in January, attention turns to the transition period —market participants expect prime minister Boris Johnson to break his pledge not to extend it. Meanwhile, the UK’s financial sector now knows it will become less aligned to the EU, and bankers on contingent contracts could be about to move across the Channel.
Increasingly divisive and unpredictable UK politics is threatening the favourable conditions on which private equity firms and the leveraged finance industry have relied during the post-crisis years. Most levfin bankers and PE partners breathed a great sigh of relief on Friday morning, when the risk of a Jeremy Corbyn-led government dissipated and no deal Brexit became far-fetched — but uncertainty over Brexit remains. Karoliina Liimatainen reports.
.png){kind=logo}
GC Asia
