Asia displays resilience to Brexit threat

 

The impact on trade is set to be the major focus for Asian economies following the UK’s Brexit vote.

While the UK is not an overly crucial market for Asian exports, the EU as a bloc is important for a number of Asian economies. According to most economists, a slowdown in UK and EU combined is likely to lead to 10-20bps of downside for overall GDP growth in Asia.

Taiwan and Korea are the most vulnerable, as these economies  have a greater reliance on global trade. Hong Kong and Singapore are likely to be affected too as these are open economies.

However, many Asian economies are well placed to withstand a Brexit-related global economic slowdown, as the region’s robust fundamentals enables Asian governments to further ease monetary policy and/or initiate fiscal stimulus. Asia is therefore likely to be seen as a safe haven for investors – particularly the ASEAN economies, which are growing due to strong domestic demand.

In a world of increasingly constrained yield and growth, with further rate hike delays expected, investors could turn their attention to the many higher yielding stocks on offer in Asia.

 

Past performance is not a guide to future performance. The value of investments can fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. Currency fluctuations can also affect performance.

This information is for professional advisers only. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and are subject to change at any time without notice. The contents of this article are not intended as investment advice. The Canada Life Investments blog page features images licensed from Getty Images International. These images shall not be downloaded, republished, retransmitted, reproduced or otherwise used in any way. Aside from the above, and unless otherwise stated, Canada Life retains copyright in and/or has a right to use all contents of this website (including text and graphics) and such contents shall not be copied, distributed, extracted or modified without the express prior written consent of Canada Life unless for private, non-commercial use.

Kim Lee

Kim Lee

Senior Portfolio Manager, Asia Pacific ex-Japan Equities

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