A glimpse at Brexit

It was a hot summer day in late June of 2016. There was an event that most of the traders and investors observing minutes by minutes, just like a football match. The UK was on a referendum about Leave or Remain in the EU. I will not try to analyse in detail the general picture, I was just trying to show my experience on one of the most important days in 2016.

In Vietnam hour, the result was published from 9 AM to 1PM on 24/06/2016. During the morning, I was not on the trading floor, being sent to one of the Vietcombank’s branches instead. However, I did not plan to miss a minute on the result.

From the very beginning, I have never expected the UK will ever leave based on the logic, the betting odds and many reports. Even on the day before, the odds still weighted to the Remain side. As the result, I expected the market will reflect positive impact from this referendum. I did not change any position in my portfolio (actually there was only one stock at the time).  My entire office watched the result like a

However, as you may already know, the result was surprisingly close and the UK decided to Leave. Everything has changed.

I still remembered. At 9AM when the market was on, VN-index reduced by 5 points, not very much for a big day like this. But as the result was published city by city, the VN-Index plunged. End of the morning session, VN-Index went down by 12 points and at the beginning of the afternoon session decreased dramatically by 34 points. That was one hell of an experience on that day. Almost 75% of the stocks were on sell orders at floor prices. And from 2PM, impressively, there was a huge cash flowing into the market, bringing the market back to 620, reduced by only 11 points. Many speculators made a great profit when the market was in a panic.

The Brexit brought up a lot of issues, not only for the UK itself but also for the world. We can at first assume that the UK will lose many privileges from being the member of EU. This event can also be perceived as the UK is trying to be more independent on its policies instead of relying on Brussels. It is too soon to say that Brexit will bring positive future for the UK or not. However, at first, it will not be easy, or even, a little painful. Since the UK is not a member of the biggest economic union anymore, analysts, experts, and investors consider the UK less strong as before. Despite the fact that the referendum was only inside the UK (it was simply the decision process in the UK), the whole world was watching it and acting on every outcome of the referendum.

From another perspective, at the end of the day, the UK would not leave immediately (at least 2 years from now) and the outlook still remains uncertain at some level. Therefore, it was probably unreasonable to believe this event is a “real” reason to push the global finance off the cliff. It was only a psychological push during that trading day. The effects are still in the future. But at the moment, we can still enjoy the re-bounce of the indices all over the world after the event. In addition, unless you are a value investor, it is still logical to short your position as the result turning out to be “leave” and then cover the position afterwards if the market reflects positively. However, that is just the theory. In reality, emotions may hold you back.

P.s: It is a shame to post this so late. I had a long holiday and I am no doubt too lazy to finish it sooner. This post should have been published at least 20 days earlier. Sincerely apologize guys.

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