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.
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