The stock market may have started today on a high, but nobody expects tomorrow's open to be quite so smooth. Whatever the vote, analysts are expecting movement.
UBS warned 20 per cent could be wiped off the FTSE 100 in the event of a vote to leave – a move which would take the index down to its lowest level since 2011.
But while they may be bundled together into a single index, there is little else companies on the FTSE 100 share besides their impressive size. A falling tide might hit all ships, but some of them will become considerably more submerged than the others.
That's the message from analysts at Liberum this morning. They've crunched the numbers and outlined the 50 companies from the FTSE 350 likely to experience the biggest share price movements after the vote.
"Unsurprisingly," Sebastian Jory, a strategist at Liberum said, "banks, housebuilders, real estate and leisure" are the sectors likely to see the biggest swings once the result of the vote is known.
Shawbrook Group is pitted to be the worst affected by a vote to Leave, with Liberum expecting 38 per cent to be chopped off its share price. They are followed by fellow mid-cap finance firm, Aldermore, which will be hit for 31 per cent.
Lloyds Banking Group is the most vulnerable FTSE 100 firm – with Brexit doing them for 24 per cent and sending the share price down to 53p. Taylor Wimpey, the housebuilders, come in at the number two slot, at risk of a 21 per cent slide on a vote to leave.
|Company||Sector||Remain rally||Leave loss|
|Shawbrook Group||Banking||+ 12.4 per cent||– 38.4 per cent|
|Aldermore Group||Banking||+ 10.1 per cent||– 31.5 per cent|
|International Personal Finance||Financial services||+ 9.4 per cent||– 29.1 per cent|
|Redrow||Housebuilding||+ 8.4 per cent||– 25.9 per cent|
|Thomas Cook||Leisure||+ 8.3 per cent||– 25.9 per cent|
Other household names that should be braced for big volatility include Thomas Cook, estate agents Foxtons, Barclays, and Domino's Pizza – all of which are on the block for a swing of more than 19 per cent.
However, these companies are also the ones who could gain the most in any kind of Remain rally that takes hold of the market in trading tomorrow morning.
While Brexit could batter Shawbrook for two-fifths of its value, a vote to stay in the EU could mean it climbs by more than 12 per cent. Similarly, Lloyds could jump by eight per cent if Remain triumphs. That would take it back above the crucial 75p level at which the government can sell its holdings of the bank for a profit.
FTSE 100 fallers
|Company||Sector||Remain rally||Leave loss|
|Lloyds Banking Group||Banking||+ 7.9 per cent||– 24.3 per cent|
|Barclays||Banking||+ 6.7 per cent||– 20.7 per cent|
|Barratt||Housebuilding||+ 6.5 per cent||– 20.2 per cent|
|Hargreaves Lansdown||Financial services||+ 6.2 per cent||– 19.4 per cent|
|Berkeley||Housebuilding||+ 5.7 per cent||– 17.8 per cent|
|Standard Life||Financial services||+ 5.6 per cent||– 17.4 per cent|
|St James's Place||Financial services||+ 5.5 per cent||– 17 per cent|
|Persimmon||Housebuilding||+ 5.5 per cent||– 16.9 per cent|
|Schroders||Financial services||+ 5.4 per cent||– 16.9 per cent|
|International Airlines Group||Leisure||+ 5.4 per cent||– 16.8 per cent|
|Aviva||Financial services||+ 5.4 per cent||– 16.6 per cent|
On the whole, Liberum said the FTSE 250 – a "cleaner" indicator of the UK market reaction to Brexit – was expected to rise by four per cent on a vote to Remain and fall by 12.4 per cent on Brexit.
How did they do it?
With so many numbers being chucked about regarding the EU referendum campaign, many think calculations put forward by experts are little more than finger-in-the-air guesses. However, the Liberum numbers are just the latest sign that economists are paying increasing attention – and putting a great deal of weight – on betting odds.
Liberum looked at the movement in individual stock prices during periods where both the Leave and Remain side have had momentum in the opinion polls and with the bookmakers.
Between 9 – 16 June, for instance, the implied probability of Brexit jumped from 24 per cent to 36 per cent. This corresponded with a seven per cent fall in the FTSE 250. In the following five days, as the tide moved back towards Remain, the odds fell back to a 25 per cent implied chance, and the FTSE 250 recovered by six per cent.
Given how closely the stock markets are tracking both currency movements and betting odds, Liberum therefore assume that the amount of arbitrage – or to what degree markets are pricing in a vote to Leave – corresponds with the implied probability.
Therefore, the movements – when the result is known for certain – will be three times as sharp if the UK decides to go it alone than if it votes to Remain, as markets move back towards a more natural price.
For example, a Remain result would mean the FTSE 250 jumped by four per cent, whereas a Leave victory would result in a 12.4 per cent fall. Similarly, if the moves are more magnified, an eight per cent rise on Remain would have equated to a 24.8 per cent fall on Brexit.
To take account of the non-Brexit goings on of recent days (there have been some, apparently), Liberum also exclude stocks that have had a significant downgrade or upgrade in their earnings-per-share forecast over the last two weeks.
Will it happen?
With the FTSE 100 at a two-week high and sterling trading at one of its strongest levels in 2016, some analysts disagree with Liberum's assertion that the markets are pricing in a 25 per cent chance of a vote to Leave – thinking it could be even less.
Capital Economics said yesterday, for instance, that a Remain rally may have already run its course, and they do not expect a pop tomorrow morning if the vote is to stay.
Hussein Sayed, chief market strategist at FXTM, issued a note this morning which asked: "What if the markets got it wrong?"
He pointed out the polls are still fiercely close, but traders are "completely reliant on predictions from the bookies … risk premium is barely priced into financial markets suggesting that the upside is limited from current levels," and warned of a double-digit share price hit to UK banks and a "disaster" on the equity markets if a vote to Leave materialises.