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Analysts warn investors to trade with caution on Friday

Banks and financial analysts around the world have warned investors of volatility in jittery markets as the results from the U.K. referendum come in. Many analysts have predicted double-digit percentage moves for U.K. and EU equities in case of an exit, while a significant relief rally is anticipated in case of a remain vote.

"While GBP (sterling) may come under significant pressure, the euro may be more stable. Risk currencies (Swiss francs & the yen) would benefit, but policy responses could limit the degree of strength quickly. We think Euro-area core yields and UK yields would decline substantially (roughly 10-40 bps), and potentially even more so in the US," UBS Global Research said in a research note.

With so much uncertainty surrounding the results, investors have been advised by many analysts to be cautious when trading.

"Be very very careful. Stay invested, stay diversified," William Hobbs, Head of Investment Strategy U.K. and Europe at Barclays Wealth and Investment Management told CNBC on TV. "For the most part, remember that the U.K. economy for the most part is a very small contributor to the world's economy. It is even smaller contributor to world's capital market."

Meanwhile, financial advisers in the U.K have urged investors to not follow the 'herd' since markets tend to react as traders follow each other. Tony Catt, a London-based financial adviser says a lot depends on what the results are but the bigger risk is if the U.K. votes to exit.

Storm clouds road ahead
John Lund | Getty Images

"The main issue with a Brexit decision is that it ushers in a lot of possible consequences as yet unknown. The market does not like a state of uncertainty and therefore the market is likely to drop," he said, adding that Friday could well be a knee jerk day.

"This knee jerk could throw up some value in the market and anybody looking to trade will need to look closely to see where this value has arisen."

Caroline Simmons, Deputy head of the UK Investment Office at UBS Wealth Management told CNBC on the Squawk Box show on Wednesday that investors should pick one sector and stick to it.


"The FTSE250 has got about 50 percent exposure to the UK in terms of revenue generation which is much more domestic than the FTSE100. Pick any sectors that have a very domestic or a very cyclical exposure so retail, financials are some areas."

Meanwhile, a number of banks have put in place various measures for trading in volatile market conditions. In a note on Wednesday, Bank of America Merril Lynch described these measures.

"In periods of extreme volatility, we have on some occasions seen delays to trades, including requests for quotes (RFQs), order taking, order processing, price streaming and/or market data dissemination," BAML said in a statement.

The statement further adds that BofAML's electronic trading platforms have volatility controls that may temporarily suspend execution and price streaming due to "rapid and adverse market movements."


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