The votes are in and the United Kingdom will dissolve its 43-year membership in the European Union, triggering mass sell-off in global markets and exchange traded funds (ETFs).
Leading the plunge, United Kingdom market-related ETFs were the worst hit, with the First Trust United Kingdom AlphaDEX Fund (NYSEArca: FKU), which provides a smart-beta play on U.K. stocks, down 17.4% Friday. The iShares MSCI United Kingdom ETF (NYSEArca: EWU), the largest U.K.-related ETF, declined 10.8% while the iShares MSCI United Kingdom Small-Cap ETF (NYSEArca: EWUS), which follows small-cap U.K. stocks, decreased 15.1%.
The CurrencyShares British Pound Sterling Trust (NYSEArca: FXB) fell 7.6% Friday, but immediately following the U.K. referendum vote, the British pound sterling plummeted over 10% to $1.3236, its worst intra-day performance and lowest point since 1985.
Peripheral Eurozone states also took a beating, with the Global X MSCI Greece ETF (NYSEArca: GREK) down 16.4%, iShares MSCI Spain Capped ETF (NYSEArca: EWP) down 15.3% and iShares MSCI Italy Capped ETF (NYSEArca: EWI) 14.6% lower.
The iShares MSCI Europe Financials ETF (NYSEArca: EUFN), which tracks European financial companies, was the worst sector play, falling off 15.5% Friday.
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The referendum on the U.K’s membership in the European Union came in with 48.1% voting to remain with the E.U. while 51.9% voted to leave, severing the U.K.’s ties with the E.U. after 43 years.
The results showed that London, Scotland and Northern Ireland were among the remain camp against the rest of the country, reports Jenny Gross for the Wall Street Journal.
As a result of the referendum, Prime Minister David Cameron, who championed the remain vote, announced his upcoming resignation and hoped a new prime minister would be in place by October.[related_stories]
“The people have voted to leave the European Union, and their will must be respected,” Cameron said Friday. “I will do everything I can as prime minister to steady the ship over the coming weeks and months, but I do not think it would be right for me to try to be the captain that steers our country to its next destination.”
The British exit will cost the European Union one of its wealthiest members and one of its biggest military powers.
While Britain has voted to leave, the country is not out of the E.U. yet. Senior E.U. officials have stated that the U.K. should immediately follow Article 50 as part of the process by which a member state leaves the E.U. The Article states that the U.K. would negotiate and settle arrangements for its withdrawal, taking account of the framework for its future relationship with the Union, the Washington Post reports. The leaving member will be given two years to comply.
Looking ahead, this Brexit vote could trigger another Scotland referendum on breaking away from the United Kingdom. A 2014 referendum on Scottish independence resulted in the country remaining with the U.K., but the results were largely contingent on E.U. membership.
Scottish First Minister Nicola Sturgeon was elected on a platform that vowed to revisit independence should the country be “taken out of the EU against our will,” CNN reports.
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First Trust United Kingdom AlphaDEX Fund
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