Brexit sees rising risk of foreign portfolio outflows

24 June, 2016

Markets deeply shocked and hit by the Brexit news and gave up risky assets in wake of increased uncertainty on UK’s economic prospects sans EU’s membership. Today’s vote, if ratified by Parliament, would immediately invoke Article 50 of the Lisbon Treaty, which provides for members leaving the EU.

Article 50 gives the country electing to depart two years to agree on terms with the EU, then their membership of the Union lapses.

In 1973 Britain joined the EU Common Market, a free trade area that would evolve over the coming decades to a very close geo-political and strategic entity. The benefits from that membership are much deeper than those of merely a Free Trade Agreement (FTA).

With Britain out of the EU, the EU-Asia FTA’s that have been signed will have to be re-negotiated at an individual level. The negative risk sentiment could see foreign portfolio outflows emerge in Asia, putting more downward pressure on currencies and bonds. Potential outflows are more likely in equities than bonds.

Equity inflows have been rising in the lead-up to the Brexit vote. How much more Asian currencies weaken further is also dependent on the USD and if Brexit changes the Fed’s view on further policy normalisation.


Source link  
Gold faces strong support at $1359

Major intraday support -$1359. The yellow metal has declined till $1359 yesterday and slightly recovered from that level. It is currently trading around $1367.19. The Intraday trend is slightly bullish as long as support $1359 holds...

US vols lowest since 2012 trade

The bullish momentum of the last three weeks culminated in the lowest 10y yield since August 2012 (in the context of QE) on a more-dovish-than-expected Fed and a pick-up in momentum for the Brexit camp...

UK gilts tumble as latest Brexit poll

The UK gilts continue to trade lower on Monday as recent polls suggested that Remain camp is ahead in the run-up to the EU referendum against Leave. Also, rising crude oil prices and firm equities drove-out investors from fixed income securities.


Oil price decline likely to bring US inflation

Inflation expectation is the United States as measured by 5year-5 year (5y-5y) forward inflation expectation rate is reaching for the bottom it made in February. The forward inflation expectations dropped to 1.42 percent in February, before bouncing back to 1.83 percent in late April...

Silver hits fresh 6 week high at $17.85

We prefer to take long position in XAG/USD only above $17.84 with stop loss at $17.68 and target of $17.99/18.18/ $18.45 levels...

Eurozone Q1 GDP revised upwards

Euro zone first quarter gross domestic product has been revised upward, beating market's expectation of no change in the revision statistics. Optimism seems to emanate from a buoyant environment of consumer spending at the start of 2016, emerging from a weak Euro and still declining crude oil prices...


UK gilts gain on weak risk appetite

The UK gilts strengthened on Wednesday as Brexit fears and global growth angst continue to weigh on the markets. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 3 basis points to 1.405 percent...

Sharp drop in German retail sales

Germany April retail sales fell for the second consecutive month in a row, taking markets by surprise despite upbeat labor market and buoyant consumer sentiment. This is a clear indication for a slowing consumer momentum in the coming months...

Indian bonds rise modestly

The Indian government bonds traded modestly firmer on Friday as rupee continued to appreciate against the USD. Moreover, investors were also cautious ahead of bonds auction later in the session...

  


Share: