THE FTSE 250 FALLS AFTER THE BREXIT VOTE
There is no
doubt that the FTSE 250 index has fallen following the vote to leave the EU on 23 June announced on 24
June (Brexit).
Many people –
mainly it seems those who voted Leave – have been questioning this analysis.
They are wrong. Of course there are dates you can pick which show the FTSE250 lower
in the past than it was after the Brexit vote. But not many.
This analysis
compares the FTSE250 post Brexit with previous months before the vote was
announced on 24 June 2016.
It compares
the previous run of the FTSE 250 with two figures for the Brexit level of the
FTSE250.
- The average closing price from 24 June 2016 to 8 July 2016 – the Brexit mean.
- The closing price on Friday 8 July 2016, two weeks after the Brexit vote was announced.
The Brexit mean of the 11 closing
prices from 24 June 2016 to 8 July 2016 was 15899.66.
Over the
previous year – 24 June 2015 to 23 June 2016 the FTSE 250 closed higher than
that on 241 out of 250 occasions (96.4%) and closed lower on 9 occasions
(3.6%).
The Brexit mean
was
- 5.4% lower than the average from the day the vote was called (19 February 2016) to the day before the vote (23 June 2016).
- 4.4% lower than the average from 1 January 2016 to that date.
- 6.1% lower than the average over 12 months from 24 June 2015 to 23 June 2016.
The closing price on 8 July 2016 was
16177.8.
Over the pre-Brexit year – 24 June 2015 to 23 June 2016 the FTSE 250 closed higher than
that on 229 out of 250 occasions (91.6%) and closed lower on 21 occasions
(8.4%).
The closing
price on Friday 8 July 2016 was
- 3.7% lower than the average from the day the vote was called (19 February 2016) to the day before the vote (23 June 2016).
- 2.7% lower than the average from 1 January 2016 to that date.
- 4.5% lower than the average over 12 months from 24 June 2015 to 23 June 2016.
Of course this
effect may disappear in weeks or months. But the immediate effect on the
FTSE 250 index of share prices in mainly UK medium sized companies is clear and
unarguable.
Why the FTSE 250?
The FTSE 250
is a better indicator of the effect of Brexit on UK companies than the FTSE 100. The FTSE 250 index measures the share prices of the 250 companies ranked under the FTSE 100 in size. The FTSE 100 contains mainly overseas companies with foreign earnings. They of course
have benefited from the fall of 10% or more in the pound against all other
major currencies including the US dollar and the euro. The FTSE 250 comprises mainly UK based companies trading in Sterling.
10 July 2016
