* Exposed stocks performing broadly in line with wider index
* Investors reluctant to make equity trades around outcome
* Scotland accounts for 2 pct of FTSE 350 revenue-Barclays
(Recasts lead, adds details from graphic)
By Tricia Wright and Vincent Flasseur
LONDON, Aug 29 With only weeks to go before
Scots vote on independence, Scotland-based stocks are reversing
months of underperformance as investors take a sanguine stance
on the impact of a potential break-up of the UK.
This is as much a reflection of the marginal exposure of UK
stocks to Scotland, with only 12 companies on the FTSE 350 index
based north of the border, as it is about investors' belief that
Scots will prove the pollsters right and vote not to split.
The performance of stocks headquartered in Scotland -
excluding listed investment trusts - began to lag the broader
FTSE 350 last October but has clawed back much of this
underperformance since May, according to data compiled by
The lag, though small and at its narrowest in almost a year,
does remain: the basket of stocks including insurer Standard
Life, soft-drink group AG Barr and engineering
firm Weir Group is up 17.6 percent in that time,
compared with a 19.5 percent gain for the FTSE 350.
There are clearly other issues at play for these stocks
besides the referendum - Edinburgh-based oil firm Cairn Energy
reported a loss for the first half of the year and is
down some 30 percent on the year-to-date - but some have warned
of the risk of increased compliance costs and contingency plans.
Several polls have shown support for independence pushing
higher, but the most recent "poll of polls", on Aug. 15, which
was based on an average of the last six polls and excluded
undecided respondents, found support for a breakaway stood at 43
percent against 57 percent for remaining within Britain.
Investors said the impact of a "yes" vote on Sept. 18 was
hard to quantify and thus hard to create an overarching strategy
around, even disregarding the probability of the outcome.
"There is too much uncertainty to do anything concrete about
it in terms of trading strategies," said Veronika Pechlaner,
head of global equities at Ashburton.
Strategists and analysts warn that a "yes" vote could mean
big changes ahead for some companies.
Banks such as Royal Bank of Scotland and Lloyds
have already said that an independent Scotland could
have a significant impact on compliance costs, taxes and credit
ratings, and Scotland's asset-management industry would also be
It could also leave a bitter taste for top whisky producer
Diageo. Scotch whisky is Scotland's second-largest
export industry after oil and gas, according to Barclays.
On the other hand, a beneficiary of independence could be
the transport industry as the "Yes" campaign has pledged to
halve air-passenger tax.
But even taking into account the variety of possible
scenarios, it is hard to avoid the fact that estimated FTSE 350
revenues that come directly from Scotland are around 2 percent
of the total - perhaps too small to aggressively trade around.
"It's certainly something that (clients) are interested in
...(but) I wouldn't say there's a lot of action taking place,"
said Ian Scott, strategist at Barclays.
Listed companies with Scottish headquarters include
temporary power provider Aggreko and bus and train
Scotland-based broker Speirs & Jeffrey said there were no
trading strategies in place to prepare for the referendum but
that they had opened bank accounts in England and sent out
letters to their clients informing them of contingency measures.
(Reporting by Tricia Wright; Graphic by Vincent Flasseur;
Editing by Lionel Laurent and Gareth Jones)