By Josephine Mason
LONDON (Reuters) – Shares in London-listed companies that make the bulk of their revenue in Britain plunged in recent months as worries about a disorderly Brexit have deepened, while stocks with foreign exposure have beaten the blue-chip benchmark.
Domestically focused UK stocks have been shunned by many investors since the June 2016 referendum on European Union membership, and the prospect of a staunch Brexiteer replacing Theresa May as prime minister has exacerbated that trend.
JP Morgan’s UK domestic plays index that tracks about 30 UK stocks that make all or most of their revenue at home <.JPDEUKDM> took a turn for the worse in mid-April, when the Brexit deadline was extended to Oct. 31 and the prospect of a leadership change increased.
The index has sharply underperformed the FTSE 100 <.FTSE> while a JP Morgan index that follows UK-listed companies making their money abroad <.JPDEUKEX> has outperformed the London blue chip index.
(For a graphic on ‘Exporters vs domestic’, click https://tmsnrt.rs/2OcgBD3)
A tough stance towards Brexit by Boris Johnson, who on Tuesday won the contest to succeed May, has also shaken investor confidence. Goldman Sachs raised its estimate of the likelihood of a hard Brexit following his election.
The basket of domestic companies includes supermarkets J Sainsbury <SBRY.L> and WM Morrison <MRW.L>, housebuilders like Barratt Developments <BDEV.L> and insurers like Admiral <ADML.L> and Direct Line <DLGD.L>.
Since the referendum, the index has risen 1.1%, while the exporter basket covering 44 companies has risen 14%. It includes industrial companies Spirax-Sarco, British American Tobacco and pharmaceutical and consumer staples Hikma Pharmaceuticals <HIK.L> and GSK <GSK.L>.
(For a graphic on ‘UK domestic stocks’, click https://tmsnrt.rs/2Ocdo6t)
(For a graphic on ‘UK exporter stocks’, click https://tmsnrt.rs/32MICEA)
(Reporting by Josephine Mason; editing by John Stonestreet)