• Sterling is this year's worst-performing G-10 currency
  • Yet it would likely rise on vote to remain, HSBC's Bloom warns

The best hedge against the risk of Britain voting to leave the European Union isn’t selling the nation’s own currency, the pound, but buying the Swiss franc, according to the continent’s biggest bank.

QuickTake Will Britain Leave the EU?

The Swiss currency, traditionally viewed as a haven in times of market turmoil, would likely strengthen if the U.K. decided to quit the EU but probably wouldn’t fall significantly if it voted to remain, HSBC Holdings Plc strategists led by David Bloom wrote in a report.

Yet selling the pound in anticipation of a “Brexit” isn’t such a good idea because sterling would likely rally on a vote to remain, they wrote.

“If we are right to assume that ‘Brexit’ is rejected, then the Swiss franc is unlikely to weaken much as little political risk seems to be priced into the currency,” the HSBC strategists wrote. “If, by contrast, the U.K. votes to leave the EU, then the franc would enjoy a sizable safe-haven bid amid the scramble out of the pound and euro.”

The pound is the worst performer among its Group-of-10 peers this year, tumbling 2.9 percent against the dollar as investors seek to reduce their exposure before the June 23 referendum.

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