Markets may be too complacent over Brexit risk, BlackRock says

Thu Jun 9, 2016 7:33am EDT
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By Jamie McGeever

LONDON (Reuters) - Financial markets, particularly equities, may be under-pricing the risk of Britain leaving the European Union, the world's largest asset manager said on Thursday, two weeks before Britons vote in a referendum on EU membership.

Owen Murfin, co-lead manager for global bond strategies at Blackrock BLK.N., said that markets appear to be treating the possibility of Brexit as a local event rather than a globally systemic risk.

"There might be a little bit too much complacency. I would think that Brexit probably should be seen, in the context of the near term, as a bigger deal," Murfin told reporters at the firm's fixed-income outlook briefing in London.

"We've got to be careful ... and with equity markets very close to their highs I think it's a sensible time to take a bit of risk off, because the outcome is very uncertain," he said.

The S&P 500 .SPX is near a record high, and even Britain's FTSE 100 .FTSE is outperforming its European and Japanese peers this year.

New York-based BlackRock oversaw $4.7 trillion in assets globally as of March 31. Of that, $1.5 trillion was in fixed income assets.

A British vote to stay in the EU could lead to a recalibration of the country's interest rate outlook, with rates and yields likely to move up to be more in line with their U.S. equivalents, Murfin and his colleagues said.

Overall, ultra-low bond yields, interest rates and returns are fast becoming the main concern for investors.   Continued...

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, June 7, 2016.     REUTERS/Staff/Remote