What if hard Brexit really happens – interviewing Jerff Lee (1)
Brexit has been delayed once again. In the past few months, Prime Minister Theresa May proposed that after the Brexit plan was overthrown, they would propose the same package but on a decoupled basis. The parliament did not let it through again. After times of delaying the timeline, Amber Hill Capital strategist Jerff Lee said in an interview that it cannot be delayed forever, so there will be a good chance with no agreement to leave the EU in the second half of the year or the so-called hard Brexit.
Jerff Lee pointed out that as early as the UK's 2016 referendum on the Brexit, there were only traditional British citizens. In fact, the geographical location of the UK is leaning more towards the West, that is, Ireland and other places are not in favour of Brexit. The Brexit issue has polarised the British nation. Therefore, it also brought up a question whether the UK should vote again. The United Kingdom does not want to see another referendum, that is why May does not change the content of the Brexit bill. As time goes by, the chances of hard Brexit are becoming progressively high.
If the UK does leave the European Union the hard way, Jerff Lee believes that the banking sector will bear the brunt of the wealth management business and asset management business in the entire Eurozone. Bankers in the UK private banks are using the UK preferential policy to work in France, Luxembourg and Switzerland before, he believes that if UK leaves the EU without agreement. Under the new convention, everything will be discussed bit by bit, and banks need to re-plan in these businesses.
The regional headquarters of the financial industry in the UK will also be relocated. He pointed out that according to statistics, in 2017/18, the British banks have spent 200 million in talents relocation. In other words, the banks have lost an average of 1-2 billion pounds. Banks may be spent on human resource allocation, and some banks based in the UK or Europe are also planning to register in Luxembourg or Dublin.
There will also be some places benefitting from Brexit, including Dublin. He said that Dublin is located in Ireland, which is a member of the European Union, and which is the only member of the European Union can reach the UK by land. Their relationship with the UK is like that between HK and Shenzhen. Dublin property prices has been rising over the past few years.
Regarding the impact of Hong Kong, Jerff Lee believes that although many Hong Kong’s listed companies have UK operations, the biggest impact of Brexit will be the trade between the UK and the EU. The trade between China and the Asia Pacific region and the UK will have little impact. There is less business between the UK and the EU. Even if the Li & Fung (494) business is global, the impact of Brexit may be the increase in the human resources cost of the UK business. This is only a limited cost, so the psychological impact on Hong Kong stocks market is greater than Actual impact.
However, the fluctuations in the exchange rate will be greater. He pointed out that the market has already reflected the possible hard Brexit in the first half of the year. The British pound has recently fallen below the low level in the past six months. The US dollar fell below 1.3 against the British pound. If there is a hard Brexit, the devaluation of the British pound may be possible to speed up. On the contrary, if the UK can leave the EU under an agreement, there will be overall benefits for the pound or the UK.