Via Financial Times

Dastardly short-sellers should have a quiet word with their purported cat’s paw, Boris Johnson. Urban myth insists they bankrolled a prime minister intent on taking the UK out of the EU so they could collect on stock price falls. If so, Mr Johnson is doing a lousy job. Many short-worthy UK stocks bounced sharply on Thursday, after EU and UK negotiators agreed a new Brexit deal.

Market moves have followed the “Boris Johnson trade” more closely than the fearful, albeit fictional, plans of Mayfair hedgies. This was a Lex investment scenario predicated on the doubtful proposition that Mr Johnson might prove more competent than he looked.

We encouraged true believers in the loquacious Latinist to short stocks such as Ashtead and Relx that are heavily exposed to dollar and euro earnings. We thought domestically focused shares, including housebuilders, retailers and high-street banks might appeal as long positions.

You would be laughing if you had made the Boris Johnson trade. The shorts have dropped and the longs have risen or stayed put over a period when the FTSE 100 has fallen 5 per cent.

You would have done even better with advice from professional investment strategists. These have nudged Johnsonites towards British Land and Land Securities, which Lex did not.

The duo are up around 15 per cent, reflecting the pivotal role a volatile dollar/sterling rate now plays in UK equity investment. An appreciating pound has boosted the value of the UK’s two biggest property companies. They are a good proxy for the prospects of post-Brexit Britain. They will own big chunks of it.

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Expect further upgrades if the haystack-haired Horatius makes progress with getting his concession-laden deal through parliament. Real estate groups will tend to pop for two reasons. First, they are geared, albeit at a historically low one-third of property values. Second, the pro-Boris trade is crowded. There are surprisingly few large, liquid stocks focused on the UK. There are plenty of UK-listed multinationals with foreign currency earnings to buy if you think the UK is doomed.

Simon French of Panmure Gordon has triangulated between earnings measures and book values to estimate that the UK market is 20 per cent undervalued relative to peers. This gap could take a very long time to close. On Thursday, Boris fans had a foretaste of what that re-rating might look like.