Markets eventually get it right. Even if it takes a while.
In one of our initial post-Brexit analysis articles, we opined that one of the big winners from the Leave victory in the UK Brexit referendum was the online trading sector, and specifically the CFD broker.
Like everyone else out there we have no idea what will actually happen in Europe. Will the UK actually fully leave the EU? Will the UK just renegotiate its position in the EU? Will the changes happen quickly? Will the EU itself fall apart? Will the Euro survive?
Point is, with #VoteLeave having won there is going to be a lot of political and economic uncertainty out there for what looks to be an extended period of time. And that means more volatility (such as the 200+ pips drop in the GBPUSD when Boris Johnson dropped out of the Prime Minister race on Thursday), more trading – and more Revenues and Profits for the online brokers.
Right after the Leave victory became apparent, however, the shares of publicly traded online brokers got dumped along with virtually all equities in a mad rush to safety. ‘Brexit Friday’ (June 24) saw shares of Plus500 Ltd (LON:PLUS) drop 3%, IG Group Holdings plc (LON:IGG) fell 4%, CMC Markets Plc (LON:CMCX) was off 3%…
Once investors had some more time to digest the news, however, things reversed very quickly.
The overall equity markets had a very nice week last week, with the UK’s FTSE 100 index up the last four consecutive days, ending up 7% for the week.
But among the biggest winners this week were the online brokers. Shares of FCA-regulated Plus500 hit a new 52 week high during Friday trading, hitting £7.07 mid-day before settling to close at £6.95 – up 16% for the week. Industry leader IG Group shares were once again approaching their all-time high of £8.40, closing right at £8.00.
In our initial reports on June FX trading volumes we’ve seen a very healthy increase in the 20-40% range at most eFX venues, and we believe that the good times will continue as long as currency volatility holds up. Which, it looks like it will.
Plus500 share price past 6 months. Source: Google Finance.