Brexit: Why Japan, HK, China may gain

LONDON • Britain's vote to leave the European  Union could throw up some winners in Asia. That is because Britain will be forced to deepen links with Asian trading partners and cut new deals allowing access to each other's markets.

Such a move could open up opportunities for the likes of China, Japan and Hong Kong, which have the strongest investment, financial, tourist and trading ties to Britain,  according to a score card by Bloomberg Intelligence economists Fielding Chen and Tom Orlik.

Losers could include Malaysia, Indonesia and the Philippines.

"As Brexit throws Britain's relations with Europe into confusion, strengthening links with Asian economies that are the main engines of global growth has seldom been more important," Mr Chen and Mr Orlik wrote in a note.

They listed five factors - including trade, investment and finance - to gauge the strength of bilateral relations.

Stronger trade links mean more potential to gain from a shift in global trade flows after Brexit, they wrote, while significant foreign direct investment in Britain offers opportunities for others, as Britain looks to stay open for global business. Strong financial ties also provide a basis for enhancing trade and investment flows, said the analysts.

Inflows of visitors will generate more income for Britain, and act as a proxy for people-to-people ties that are the basis of goods and capital flows, while tourists can also benefit from a sharp drop in the sterling following the Brexit vote, which has put Britain on sale.

Within the overall rankings, China comes in third, behind Japan and Hong Kong. Its score is boosted by trade and tourism ties, but it slips down the ranks because of the weakening yuan.

To be sure, much about Britain's future relations with Europe and Asia remains unknown as repercussions from the Brexit vote have only just started to unfold.

Trade deals take time to materialise and trends of investment play out over years, not months, the Bloomberg Intelligence analysts cautioned. Still, those who want to seize the opportunity won't wait until the dust has settled.

"Businesses and investors are not going to wait too long before grasping the Brexit opportunity," Mr Chen and Mr Orlik wrote.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 10, 2016, with the headline 'Brexit: Why Japan, HK, China may gain'. Print Edition | Subscribe