Asia-Pacific economy 'safe' after Brexit

The impact of Britain's exit from the EU on the Asia-Pacific economy is assessed to be insignificant due to the region's limited trade exposure to the country, according to Cushman & Wakefield.

The unit forecasts that the economic impact of Brexit on the Asia Pacific region will be limited. The UK is a relatively small export market for Asia Pacific, accounting for about 2% of total exports, much lower than the chain reactions on the EU (accounting for about 12% of exports).

The biggest concern is the currency markets. The pound fell 11.5% against the dollar after the referendum, before recovering from June 28. Currency fluctuations pose some risks to businesses and the sluggish economies in the region.

In Japan, a rising yen puts pressure on exports, making them less competitive and cutting into repatriated profits (among other effects). Japan may demand further stimulus from banks, including intervention in foreign exchange markets.

The impact of Brexit on the Asia-Pacific region is expected to be very limited.

But the impact of Brexit on China has been minimal. For now, the biggest impact has been seen in modest capital outflows. Some economists predict a sharp decline in the yuan in the coming months as investors flock to the US dollar.

Foreign direct investment (FDI) from the UK, which accounts for nearly 10% of total FDI into India, is likely to come to a halt, mainly in the services segment (especially software outsourcing companies). Since 2015, Indian businesses have used the UK as a base to expand their markets in the EU. In the long term, India’s demand for skilled labor, as well as trade and investment with India, is expected to remain strong.

While Brexit has led to some uncertainty and caused investors in the region to reassess their access to UK markets, investors with a longer-term vision cannot ignore the growth opportunities in Europe and especially the UK in the current volatile environment.

Key gateway cities in North America and Asia Pacific could benefit in the short term from Brexit. The Asia Pacific region can expect to benefit from the diversification of capital sources from the UK, driving increased investment activity in key Asian markets.

Japan and Australia have been attractive markets for foreign capital over the past three years. Opportunities in Hong Kong, South Korea and China, as companies and investors sell assets to reduce debt and recapitalize, could attract more interest. Singapore could see new capital flows.

In the long term, the region should be able to safely weather any Brexit-induced volatility, with domestic tailwinds again taking center stage, cementing Asia Pacific’s position as the fastest-growing region in the medium term.

According to VNE