Big im­pact fears have HK brac­ing for Brexit hit

China Daily (Canada) - - HONG KONG -

As the date of the United King­dom’s ref­er­en­dum on the Euro­pean Union (EU) edges closer, the ques­tion that’s up­per­most in ev­ery­body’s mind is: How will the vote af­fect Hong Kong?

The an­swer is “quite a bit”, es­pe­cially if you have money parked in eq­ui­ties ei­ther in Hong Kong or other fi­nan­cial cen­ters. Al­most all re­cent opin­ion polls have pointed to a re­sult that would be too close to call, giv­ing rise to un­cer­tain­ties that have un­nerved stock mar­kets around the world.

In­vestor sen­ti­ment has been fur­ther damp­ened by re­peated warn­ings from world lead­ers that a Bri­tish vote on ex­it­ing the EU, or Brexit, could have a desta­bi­liz­ing im­pact on the al­ready weak global econ­omy. Stock an­a­lysts have warned that a grow­ing pos­si­bil­ity of Brexit, as in­di­cated by the lat­est polls, has pushed mar­kets to the brink of a full­blown panic sell-off.

In these un­cer­tain times, in­vestors can be ex­pected to fol­low their in­stincts in search of safe havens to park their money. That ex­plains why they are flock­ing to the bond mar­ket, snap­ping up gilt-edged se­cu­ri­ties. As a re­sult of the strong de­mand, bond yields have tum­bled.

Ac­cord­ing to a BBC re­port, yields on 10-year UK govern­ment bonds have fallen 0.06 per­cent­age point to a record low of 1.146 per­cent, while 20-year and 30-year “gilts” have also hit record lows.

Even if you don’t in­vest in stocks and bonds, you can still feel the im­pact of Brexit. US Fed­eral Re­serve Chair Janet Yellen has warned that Brexit could hurt the US econ­omy. The prog­no­sis of var­i­ous busi­ness lead­ers is equally dire. They pre­dict Brexit could push the EU back into the eco­nomic re­ces­sion from which it has tried so hard to ex­tri­cate it­self the past few years.

As an ex­ter­nally-ori­ented econ­omy, Hong Kong would take a hit from a Brexit-in­duced global eco­nomic down­turn. But, it’s not clear how big the im­pact would be.

One thing is al­most cer­tain — global in­vest­ments will re­main in a state of flux over the next few days. If you be­lieve that a “re­main” vote will pre­vail, go ahead and try your luck. It’s go­ing to be a short-term bet any­way. You’ll know for sure by Thurs­day.

PRO­VIDED TO CHINA DAILY

Mar­kets have been left on the brink of a panic sell-off as the en­tire global econ­omy, and not just the Euro­pean Union, will take a hit if the Bri­tish vote to leave the Euro­pean bloc.

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