“The Jersey economy should be able to take a US and UK slowdown, even a mild recession, in it’s stride and be a key player in the reconstruction of the global financial sector that is bound to occur over the next 18 months” says Peter Smart, divisional director, Brewin Dolphin.
Within an in depth article written for Jersey clients, commenting, amongst other things, on the decision by the Bank of England’s decision to keep interest rates unchanged at 5.5%, “there will undoubtedly be more base rate cuts to come” and “this will be welcomed by participants in the housing market,” adds Smart.
But he finds it difficult to see how the cooling of the UK and US property sectors can infect the local Market with anything more than a slowing in house price inflation.
Smart also outlined a possible slow down in economic activity, in the UK and US but reiterated that the policy stimulus of lower rates from both the US Federal Reserve and the UK Monetary Policy Committee will go some way to having a positive impact.
He commented that the main source of risk to the local financial economy lies in the recent liquidity seizure that became known as the credit market crisis. However, he believes the market failure will ultimately be to the Island’s advantage as opportunities arise from the fallout of the excesses caused by the Leveraged Finance Boom from the last few years.
“The Channel Islands are a major centre for a wide range of securitisations that rely on picking up the financial spin-off thrown out by Capital Markets. Jersey may feel the impact of a possible lull in the issuance calendar. However, the dynamic nature of the financial sector in Jersey means that investors and financial institutions will find ways to exploit and take advantage of opportunities that will undoubtedly present themselves in the very near future,” says Smart.
He believes they will be the buyers of a wide variety of incorrectly priced assets, mostly drawn from the financial sector, for example; a bank’s book of mortgages on offer at distressed levels or even the banks themselves.