British Pound takes pounding as world markets tumble on Brexit vote


British Pound takes pounding as world markets tumble on Brexit vote

Britain’s historic decision to leave the European Union sent shockwaves through global markets Friday, plunging stock prices and wrangling currencies. Futures for markets in Europe and the United States are predicting that stocks could plummet sharply there as well when indexes open.

As the vote shifted sharply in support of the Brexit, the British pound had its worst fall on record, tumbling to a 31-year low against the U.S. dollar on the results.

The carnage was spread widely across Asia, with Bloomberg estimating that markets in the region shed at least $700 billion in capitalization during trading Friday.

Hong Kong’s market slid by more than four percent during trading and South Korea more than three percent.

Japan had to halt trading for 10 minutes after a circuit breaker kicked in to calm the market.

Tokyo’s Nikkei index plunged by more than 8 percent and the value of the Japanese Yen slipped nearly five percent against the U.S. dollar.

Japanese Finance Minister Taro Aso met with reporters shortly after the results of the vote were released, giving assurances that Japan was keeping a close eye on markets.

“The stability of the foreign exchange markets is of utmost importance for global growth but currently the foreign exchange markets are ‘extremely nervous,” Aso said.

South Korea’s government also pledged to do its best to “minimize any adverse impact of the Brexit outcome on the South Korean economy.”

Speaking during an emergency meeting Friday aimed at fending off any fallout from the vote, Yonhap news agency quoted Vice Finance Minister Choi Sang-mok as saying, “we will take all necessary measures, including smoothing operations to soothe the foreign exchange market.”

So far, the biggest victim from the vote appears to be the pound, which dropped to $1.34 by midday in Asia Friday, down from $1.50 earlier around the time when polls closed in Britain, its highest level this year.

Analysts tell VOA that foreign currencies are likely to see the most turbulence.

Frank Lee, chief investment officer with DBS Bank in Hong Kong, said that in their view $1.33 is the floor for the British pound.

He also said that while there will be a period of transition after the vote, opportunities will follow.

“If the situation or rescue plan is accepted by the market, or the market is stabilized by all the proposals [that are put forward], the market can then refocus which areas where money can go, where to invest,” Lee said, adding that Asian markets are a good pick for the second half of this year.

The Organization for Economic Cooperation and Development, the International Monetary Fund and market economists have warned that the uncertainty caused by the so-called “Brexit” referendum could cause substantial economic impact.

However, Andy Xie, an independent analyst in Hong Kong, said that while many are worried about the financial shock from the vote and the impact on London as a financial, he doubts the impact will be that great.

He said that while Britain’s relationship with the European Union may suffer, its currency depreciation is not necessarily a bad thing because Britain is too expensive.

“That’s why it’s manufacturing has been hollowed out. And their economy is very dependent on London, the property bubble and global financial speculation,” Xie said. “I think the UK economy is very unhealthy, so it needs a shock to jolt itself out of this problem a more sustainable path.”

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