The referendum has been a major talking point across the political and financial worlds – entirely understandable given the impact a “Yes” vote could have on a number of different areas.
Questions over currency, tax and the future location of Scottish based companies remain unanswered.
The future of the North Sea’s oil supply and the UK’s nuclear fleet are other huge talking points.
One YouGov poll which had Alex Salmond slightly ahead on Monday saw big share price losses for a number of companies domiciled in Scotland, and a number of others with large operations north of the border.
A win for the “Yes” campaign is likely to lead to further uncertainty in markets.
With that in mind, we highlight a selection of Scottish-domiciled FTSE 100 names and ask Graham Spooner, investment research analyst at the Share Centre, how impacted they would be by a “Yes” vote and whether investors should buy, hold or sell in the run up to the referendum.Spooner (pictured) and his team central belief is that a vote for independence won’t cause an immediate sell-off, but the political wrangling over Scottish secession is likely to cause a period of uncertainty.
Royal Bank of Scotland
RBS is the most obvious stock exposed to the referendum.
Not only is it based in Scotland, but following the financial contagion after the financial crises, the bank is 70 per cent owned by the UK government and therefore very large question marks remain over its future.
Reports earlier this week confirmed that the bank will relocate its registered headquarters to London in the event of secession.
Unlike Lloyds – which is also headquartered in Scotland – shares in RBS have not bounced back strongly over recent years.
One of the major reasons for that, according to analysts, is that management has been far less effective at deleveraging and cost-cutting than Lloyds.
Performance of stocks versus index over 5yrs
Source: FE Analytics
There are also big concerns over the company’s investment banking arm.
Spooner has had a sell-rating on RBS for some time and thinks it is unlikely that is going to change, no matter what happens after the referendum.
“We have held it as a sell and we will continue to,” Spooner said. “There are so many problems with RBS such as the huge amount of debt it still has and who is going to back them in the future if Scotland becomes independent. However, we will have to see what happens after the referendum to make any further decisions.”
Despite RBS’s current issues and the impact a “Yes” vote could have, our data shows there are 15 funds in the IMA universe that count it as a top-10 holding.
They include FE Alpha Manager John Wood’s JOHCM UK Growth fund, Alastair Mundy’s Investec UK Special Situations fund and Kevin Murphy and Nick Kirrage’s Schroder Recovery portfolio.
Standard Life
Based in Edinburgh and employing more than 5,000 people in Scotland, Standard Life saw its share price fall 2.6 per cent on Monday after preliminary polls suggested that a “Yes” vote was the most likely outcome.
Performance of stock over 1 month
Source: FE Analytics
It is also one of the only major Scottish-domiciled companies which has announced contingency plans to move south of the border if Scotland becomes independent, due to the tax complications it would cause for UK customers.
Spooner says investors in Standard Life should hold onto their shares as he says prices are unlikely to fall dramatically even if Salmond is victorious.
He points out that the stock has already come close to making back the losses it sustained last Monday.
The Share Centre currently have it as “strong hold” as although they like the company and think its outlook is good, no matter what the outcome of the vote, they have typically favoured some of its competitors, including Prudential.
Most fund managers seem to agree with Spooner, as only 11 IMA funds count it in their top-10.
They include CF Odey Portfolio, JOHCM UK Equity Income and Artemis High Income.
SSE
Spooner says that SSE, the UK’s second largest energy provider which is based in Perth, is exposed to the referendum as it receives grants from the UK government for its Scottish wind farms.
The future of an independent Scotland’s energy policy still remains unclear but, like Standard Life, shares in SSE fell on Monday.
While Spooner has the stock as a hold due to its positive income characteristics, he says this may change if it were to fall dramatically in the event of a “Yes” vote.
“We don’t see any significant falls happening overnight,” he said.
“As to whether our view [on SSE] will change, we will have to react to what comes out of the two parliaments at a later date.”
According to FE Analytics, 14 funds count SSE as a top-10 holding such as Rathbone Income, Trojan Income, Marlborough Multi Cap Income and Fidelity Special Situations.
Babcock
Babcock, the defence company, is the only stock on the list that is already domiciled in England.
However, as it employs more than 3,000 people in Scotland at its civilian operations at Faslane submarine base and Rosyth naval dockyard, it too was hit by the YouGov poll earlier this week.
Like most future policies, the outlook for the UK naval and nuclear operations in Scotland is uncertain.
Spooner rates the stock highly, and thinks that any future falls would present investors with an attractive buying opportunity.
“We have Babcock as a buy. If there were to be further falls we would reiterate that rating,” he said.
“If Scotland becomes independent, there could be the need to build a new nuclear submarine down South, which over the shorter-term could present an opportunity for Babcock.”
Our data shows that 14 funds hold it in their top-10, including FE Alpha Manager Julie Dean's former Schroder UK Opportunities fund and the five crown-rated Invesco Perpetual UK Strategic Income fund, which is headed up by Mark Barnett.
He recent bought the stock for his Invesco Perpetual Income and High Income funds, which he took over from Neil Woodford earlier this year.
Weir Group
The final company on the list is multinational engineering firm Weir Group, which operates in the mining, oil & gas and power markets.
The group’s chief executive, Keith Cochrane, has already pinned his colours to the mast and said he will vote “No” on 18 September.
When asked whether Weir would move to England, he said it would all depend on the currency and tax situations and whether Scotland would still be part of the EU.
The company, which is currently headquartered in Glasgow, also saw its shares fall on Monday.
Spooner rates the stock as a “hold”.
He doesn’t think its share price will fall significantly as though it is based in Scotland, a sizeable chunk of Weir Group’s operations are based overseas.
“We have no real worries about Weir Group,” he said.
Weir group employs 14,000 people worldwide and has facilities in Europe, North America, South America, Asia Pacific, Australasia, the Middle East and Africa.
FE Alpha Manager Nigel Thomas’ £4.6bn AXA Framlington UK Select Opportunities fund is one of only six IMA portfolios that count Weir Group as a top-10 holding.