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Banks

PIMCO sees 'significant' chance of Brexit vote in UK

LONDON (Reuters) - Global investment firm PIMCO sees a significant chance of Britain voting to leave the European Union in its June 23 referendum but this would not deal a big blow to the global economy, executives with the firm said on Thursday.

The offices of Pacific Investment Management Co (PIMCO) (L) are shown in Newport Beach, California August 4, 2015. REUTERS/Mike Blake

PIMCO managing director Mike Amey put the likelihood of Britain voting to stay in the EU at about 60 percent. Bookmakers price the chance of a “Remain” vote higher, at about 80 percent, while opinion polls suggest the two sides are evenly split.

“There’s a pretty significant chance that we leave,” Amey told reporters. “It would be a significant event for the UK, but it wouldn’t be a globally systemic event. It wouldn’t derail the global economy.”

The International Monetary Fund has previously said a British exit, or Brexit, could hurt the fragile global economy.

Pimco (Pacific Investment Management Co.) had $1.5 trillion under management as of the end of March. It is headquartered in Newport Beach, California.

Amey said PIMCO’s views on the likely outcome of Britain’s EU membership referendum had remained unchanged in recent weeks amid a flurry of sometimes contradictory opinion polls.

A YouGov poll published on Wednesday showed both camps level at 41 percent, with 13 percent undecided.

Amey said he expected sterling to trade in a range of around $1.40 to $1.46 or $1.47 between now and the referendum and if Britons opted to leave the EU it could fall to $1.30. A “Remain” vote could push the pound up to as high as $1.55, he said.

A Brexit vote would not pose a risk to the quality of British government debt, which could even benefit from a likely interest rate cut to zero by the Bank of England to offset the shock to the economy, said Andrew Balls, PIMCO’s global fixed income chief investment officer.

“This is not an event like a euro zone country leaving the euro zone,” Balls said. “This would be a decision in terms of the trade arrangements, but not something that would really affect the sovereign credit risk.”

Amey said PIMCO had been buying short to medium-term British government debt, such as 5-year gilts. Debt issued by UK banks, which PIMCO has recommended to investors, might represent a buying opportunity in the event of a Brexit.

The banking sector was strong enough to withstand the shock of a Brexit and any messy divorce process between Britain and the EU, he said.

Writing by William Schomberg; Editing by Gareth Jones

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