Market Report: Housebuilders rally as prospects of Brexit Doomsday share dives fade

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With the clock ticking down to Thursday’s big vote, the City’s soothsayers have been polishing their crystal balls and predicting the winners and losers from a potential Brexit.

The starkest warning came on the housebuilders, as Jefferies speculated that their shares will plummet if Britain quits the EU.

Even though the fall would not be as dramatic as after the financial crisis, analyst Anthony Codling reckons the housebuilders would shrink in value by an average 44%, stemming from a 20% fall in land values.

Persimmon tanked 88% from its 2007 peak after the credit crunch, and Codling predicts it will again be the major casualty if Britain quits the EU, falling by 62% — a drop big enough to relegate it from the FTSE 100.

He also suggested big dividend-payers could suffer as cash flows dry up and builders look to buy up land on the cheap, which typically happens after a downturn.

But a Remain-inspired rally helped housebuilders surge today, with Persimmon up 88p, or 4.6%, at 2030p, Taylor Wimpey 10.36p higher at 186.36p, and Barratt Developments 32.9p, or 6.2%, firmer at 564.40p.

Other shares seen as most exposed to Brexit, including banks and airlines, helped the FTSE 100 to its best day since February, up 132.75 points or 2.2% to 6153.84, as polls tilted back towards Remain.

Picking out winners from a possible Brexit, most brokers suggest stocks with less exposure to the pound will outperform their peers. Those include aircraft engine maker Rolls-Royce, one of the most vocal advocates for Remain.

Writing to employees, Rolls, whose shares improved 16p to 631p, argued that Brexit would limit “its ability to plan and budget for the future”. But today, JPMorgan said: “It is very possible that a sharp depreciation in sterling (in a Brexit scenario) could have an immediate positive impact on Rolls-Royce’s shares.”

Citi had the same reason for upgrading “Brexit resistant” Inmarsat to Buy as the satellite communications firm advanced 31.13p to 740.13p.

Away from the referendum, Ocado has overtaken Carillion as the most shorted stock on the LSE after investors reined in bets against the infrastructure services firm. The online grocer, still reeling from Amazon Fresh’s launch in London, was among the few fallers today, sliding 1.6p to 230p.

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June 20, 2016 |
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