One of the most talked about issues surrounding the world today is the Brexit. Brexit is shorter term that refers to “British Exit”. It is the strong vote of British people to detach themselves from the European Union (EU). This referendum impacted the global markets including that of Singapore’s.
For starters, Brexit contributed to the changes in exchange rates as the value of Pounds drop in its lowest level in decades. Aside from this shift in currency, the Brexit has implications in Singapore’s trade, properties, and investments.
CURRENCY
The British Pound is in its weaker state – as of the moment.
To illustrate, imagine Sally is a Singaporean expat who moved to United Kingdom 6 years ago. Being financially savvy, she made a plan to save some of her money for retirement back home. Since Sally kept a relatively huge sum of money in Pounds, she was surprised to find out that her funds are worth less than they were a week ago.
Aside from the individuals like Sally, British companies are affected by the weaker British currency. It will cost them more money to grow and expand their businesses here.
TRADE
Unlike other ASEAN countries, the Singapore government has concluded their negotiations for “Free Trade” with the European Union. Within the Free Trade agreement, any imports and exports between EU and Singapore are more affordable and are subjected to lesser restrictions. This greatly helped our transactions as we imported over S$44.46 Billion worth of goods and products from the EU last year.
An issue floats as majority of our EU trade was with the Brits. There seems to be an uncertainty whether Britain will have more or less bargaining power over Singapore after the Brexit.
PROPERTY
According to Knight Frank, Singaporeans lead the list of Asian buyers who patronized United Kingdom commercial properties in 2015. With the prevalent clamor of Singaporean buyers and the ambiguity of the British market, banks such as UOB and DBS had to act quickly.
In a statement, UOB says that they “will temporarily stop receiving foreign property loan applications for London properties.” While, DBS is advising its lenders to be more cautious.
INVESTMENT
Behind Japan and Hong Kong, Singapore ranks third as the largest investors in EU. This is why the population of the Singaporean investors will be surely affected. In particular, a stock called GL Ltd (SGX: B16) encompasses more than 5,000 hotel rooms in London. If the British currency will decrease further, it can pressure GL Ltd’s profit in Singapore dollars.
Image Credits: pixabay.com
As a solution, experts suggest to diversify your investments in terms of currency exposure.
Let me close with the post that PM Lee Hsien Loong published in his Facebook page:
https://www.facebook.com/leehsienloong/posts/1142353405827364
“Singapore will continue to cultivate our ties with Britain, which is a long standing friend and partner. We hope in time the uncertainty will diminish, and we will make the best of the new reality.”