Most Southeast Asian stocks opened lower on Monday, in line with broader Asian peers, as markets struggled to contain the fallout of Britain’s decision last week to leave the European Union.
Among many questions the British exit has triggered are just how much the UK and European economies will slow, how they will negotiate their new relationship and how European leaders will try to boost the crumbling European Union.
Britain is likely to enter a recession within the year as a result of the leave vote, a decision that will stunt global economic growth as well, Goldman Sachs’ top economists said on Sunday.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent at 0355 GMT in volatile trade as companies with UK exposure in particular came under more pressure. Concerns over Brexit however could prevent the U.S. Federal Reserve from raising rates in coming months, which would be a big comfort for Asian markets.
Malaysia fell, dragged down by healthcare stocks. IHH Healthcare Bhd lost 2.8 percent.
Financials, the biggest constituent of the index by market capitalisation, were also down, with Malayan Banking Bhd falling 0.2 percent, and CIMB Group Holdings losing nearly 2 percent.
While Asia’s response to the unexpected Brexit vote is likely to be for central banks to step into forex (FX) markets to provide liquidity, “based on past experience, perhaps the BNM (Malaysian Central Bank) may be relatively reluctant to intervene,” Siddharth Mathur, Citi Asia FX & Rates strategist said in a note.
Singapore shares were down 0.4 percent, with DBS Group Holdings and City Developments Ltd among the biggest losers on the index.
“After Friday’s sell-down on the back of the Brexit referendum, we expect the developers to remain subdued in the subsequent fallout. This is on the back of a more geographically diversified asset base,” Citi said in a note.
Vietnam fell 0.6 percent, with technology and industrial stocks amongst the biggest losers. “Investors are overreacting to Brexit,” said Duong Manh Dung, trader at VnDirect Securities.
“The market needs two to three sessions to rebalance.” Sacom Development and Investment Corp lost 2.2 percent, while Cotec Construction JSC dropped 2.6 percent. Bucking the trend, Thailand rose 0.4 percent, with consumer cyclicals and basic materials leading the gainers.