London - UBS has cut its year-end target for the FTSE 100, citing political uncertainty in Britain following its vote to leave the European Union.
The Swiss investment bank cut its end of year forecast for the FTSE 100 to 5 500 from 6 500, basing the estimate on a fall in valuations to halfway between a recent peak and the crisis levels of 2012.
The strategists said that while there would be de-rating of British equities given heightened uncertainty, a significant fall in sterling would cushion the impact.
Following the referendum result, Prime Minister David Cameron said he would resign without invoking Article 50 and formally starting the process of leaving the EU, sparking a leadership battle in the ruling Conservative party.
Read also: ‘Don’t delude yourself, UK’
“We see a significant amount of uncertainty around the UK over the next few months. We do not know who the Prime Minister will be, or when, or if, Article 50 is invoked and there are even possibilities of a General Election given the current fluidity of UK politics,” strategists at UBS said in a note.
“This suggests a large degree of uncertainty around this target and also risks to the upside (as well as downside) if there were to be a rapid improvement in the political backdrop.”
UBS also cut its target for the STOXX Europe 600 to 340 from 400.
REUTERS