Brexit shocks the world, but minimal impact on Philippines

Majority of Britons voted to exit the European Union, with 52% voting for what is now known as "Brexit" (short for British exit).

News of the referendum results sent shockwaves to the financial markets in the UK and in other stock markets worldwide.

(Image Credit: USA Today)

The UK pound went down to its lowest in 30 years and the European markets headed for the biggest drop since 2008. Asian markets also suffered, as Japan's Nikkei dropped by 7.92%, China's Hang Seng Index by 2.92%, Korea's KOSPI by 3.09%, and so on.

The Philippine Stock Exchange Index (PSEi) wasn't spared from the effect of Brexit. The local stock market plunged by as much as 191 points intraday and settled at -100 points or -1.29%. The Philippine peso also depreciated against the US dollar, going down by 41.5 centavos, ending at P46.950 to the dollar.

The referendum that took place on June 23, is actually the second referendum on the issue of UK's membership in the European Union. The first referendum took place in 1975, wherein 67% of voters preferred continued membership.

UK Prime Minister David Cameron announced his resignation effective October, right after referendum results showed that the Brexit vote won. Cameron is a staunch advocate of the "Remain" camp. He believed that Britain is stronger and better if it remains a member of the EU.

How will Brexit affect the Philippines?

According to some analysts, Brexit will have minimal impact on the Philippines.

According to Donald Dee, the COO of the Philippine Chamber of Commerce and Industry, the Philippines does not have a free trade agreement with the EU up to now. In a text to GMA News Online, Dee said he does not see a major negative impact on the Philippines.

Analyst said that market volatility may happen in the near term because of risk aversion, but most are in agreement that the effect will not hurt the country that much.

A lot of analysts agree that the impact of Brexit might be temporary, since the Philippines has minimal trade volume with the EU.

The selloff in the local stock market is seen as a knee-jerk reaction to the unexpected referendum results.

However, the Bangko Sentral ng Pilipinas will still remain vigilant as to the Brexit effects on the country and is prepared to take immediate and necessary steps to minimize its impact on local financial markets.

BSP Governor Amando Tetangco said, "BSP is ready to provide liquidity to our market as needed. But we don't see any need to change stance of monetary policy at the moment."

Given this Brexit scenario, the safe haven seen by some investors are Yen, US dollar, and gold.

But Tetangco believes that the Philippines have "sufficient strong macroeconomic fundamentals" that should make investors think twice about leaving the domestic financial markets.

In other words, just sit tight and stay invested in the Philippines. Remember that our country has one of the highest Gross Domestic Products in the world. At 6.9% GDP for the first quarter of the year, the Philippines is Asia's the fastest growing economy.
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