Derbedeu
03-01-2010, 11:30 AM
Greece Now, U.K. Next as Scots Ready for Pound Plunge
While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next.
Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt. Concern that Greece won’t be able to cut its budget deficit helped send the euro 5 percent lower against the dollar this year.
“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.”
Money managers in Edinburgh, where investment decisions have been made on behalf of insurers, pensioners and the wealthy for two centuries, are maneuvering to protect assets from the U.K. economy as it limps out of its worst recession on record.
Bruce Stout, whose Murray International Trust Plc in Edinburgh has doubled over the past five years, said the chance of a plummeting pound are “better than even” and his biggest holdings are in Asia and Latin America. He called sterling a “very vulnerable currency.”
U.K. fund managers at Aegon Asset Management and Scottish Widows Investment Partnership, together responsible for more than 30 billion pounds ($45 billion), said in January they are buying companies that do the bulk of their business abroad.
‘Very Dire’
“When there’s a fiscal crisis, the markets tend to punish that country very quickly,” said Bathgate, who is responsible for 560 million pounds. “I don’t think Britain is in nearly as bad a position as Greece. We’ve got a good taxation system, however the position of the economy is very dire.”
The U.K.’s budget deficit is roughly the same as Greece’s, both exceeding 12 percent of economic output. Moody’s Investors Service and Standard & Poor’s said last week they may cut Greece’s credit rating as the five-month-old government struggles to curb spending and control its debt.
British Prime Minister Gordon Brown’s government in December increased its planned gilt sales for the financial year ending this month to a record 225.1 billion pounds from the 220 billion pounds announced in April. Moody’s Investors Service said in December the U.K. may “test the Aaa boundaries.”
[...]
The pound may fall below parity with the euro and drop to the lowest level against the dollar since the mid-1980s should the U.K. cut spending too quickly, Mansoor Mohi-Uddin, chief currency strategist at UBS AG, said in a Feb. 24 report.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVDvzOH9wSks
While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next.
Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt. Concern that Greece won’t be able to cut its budget deficit helped send the euro 5 percent lower against the dollar this year.
“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.”
Money managers in Edinburgh, where investment decisions have been made on behalf of insurers, pensioners and the wealthy for two centuries, are maneuvering to protect assets from the U.K. economy as it limps out of its worst recession on record.
Bruce Stout, whose Murray International Trust Plc in Edinburgh has doubled over the past five years, said the chance of a plummeting pound are “better than even” and his biggest holdings are in Asia and Latin America. He called sterling a “very vulnerable currency.”
U.K. fund managers at Aegon Asset Management and Scottish Widows Investment Partnership, together responsible for more than 30 billion pounds ($45 billion), said in January they are buying companies that do the bulk of their business abroad.
‘Very Dire’
“When there’s a fiscal crisis, the markets tend to punish that country very quickly,” said Bathgate, who is responsible for 560 million pounds. “I don’t think Britain is in nearly as bad a position as Greece. We’ve got a good taxation system, however the position of the economy is very dire.”
The U.K.’s budget deficit is roughly the same as Greece’s, both exceeding 12 percent of economic output. Moody’s Investors Service and Standard & Poor’s said last week they may cut Greece’s credit rating as the five-month-old government struggles to curb spending and control its debt.
British Prime Minister Gordon Brown’s government in December increased its planned gilt sales for the financial year ending this month to a record 225.1 billion pounds from the 220 billion pounds announced in April. Moody’s Investors Service said in December the U.K. may “test the Aaa boundaries.”
[...]
The pound may fall below parity with the euro and drop to the lowest level against the dollar since the mid-1980s should the U.K. cut spending too quickly, Mansoor Mohi-Uddin, chief currency strategist at UBS AG, said in a Feb. 24 report.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVDvzOH9wSks