The impact of the British election for global investors comes down to one simple question: will the Conservative Party have sufficient MPs in the British Parliament to smoothly get their Brexit agenda through?
As counting continued on Friday morning, the certainty with which financial markets had treated the election outcome had disintegrated. A BBC exit poll showing a hung Parliament caused a 2 per cent plunge in pound sterling, which recovered then dipped even lower on early results which showed the British Labour Party confounding hopes of a Conservative landslide.
"A minority government is the worst possible scenario," said Perpetual head of multi-asset strategy Matthew Sherwood. "It elevates the political risk premium over every single piece of legislation ... The more uncertain the outcome, the more political risk will be priced into markets.
Of key importance is how the Brexit negotiations will now proceed, said Colonial First State Global Asset Management chief economist Stephen Halmarick. "There's already talk discussions will be delayed until they know what form the government will take and what will happen to Theresa May," he said.
Performance fade
"The UK economy has been outperforming expectations after the Brexit vote. If you have a hung Parliament, or a minority government and decisions can't be made, that outperformance may fade."
A hung Parliament, and a delay in Brexit, may in turn delay foreign investment, which could weigh on economic growth. It could also complicate the passage of other economic reforms.
The uncertainty over Brexit may persist even if the Tories secure a majority government in their own right, noted Mr Sherwood.
Part of the reason Mrs May called an election was due to her narrow majority in the House of Commons. Brexit is not universally popular within the Conservative Party, so the small margin left her government vulnerable to the whims of outspoken MPs. The British parliamentary system lacks the strongly enforced party discipline of Australia's Parliament, meaning a narrow majority or a coalition government could both pose difficulties to the government's agenda.
Counteracting any economic impact may be the performance of pound sterling, which declined sharply after Brexit and has yet to reach previous levels.
For those investing into the UK, a lower pound isn't a bad thing, said Mr Sherwood. "The UK market has rallied very strongly on a lower pound and stronger economy. If Brexit has higher risk around it, you might start to see that growth deteriorate, though the pound is likely to deteriorate to absorb at least some of the shock."
The pound had enjoyed five months or so of relative stability, said OzForex's head of corporate dealing Michael Judge. "Investors have now been thrust back into this world of 'who'll be the ruling party'. There had been an economic focus for the pound, but that's gone away. It's disappointing."
Aussie hurt
The Australian dollar has also been hurt by the uncertainty, gaining against sterling but falling against the US dollar, after hitting a one-month high against the greenback on Wednesday.
"Given the Australian dollar is this broader proxy for risk, when there are volatility flare-ups, you do see it get knocked about," Mr Judge said. "You'll see major units such as the greenback and the Japanese yen rallying."
Aside from some effect on the Australian dollar, the impact of a hung British Parliament on Australian investors is likely to be muted, said Mr Sherwood.
"The largest impact will be on UK. There may be some collateral damage into the European sharemarket. But I think the global implications are fairly modest."
UK-based financials and other UK-exposed companies listed on the ASX may be disproportionately affected. These include Clydesdale Bank and Henderson Group, both of which are headquartered in the UK, as well as companies like BT Investment Management, Iress and Westfield, which all have large British divisions.
