Pound sinks further against Singapore dollar after UK election shock, Asian stocks see little fallout

A British ten pound note is seen in front of a stock graph in this illustration photo.
A British ten pound note is seen in front of a stock graph in this illustration photo. PHOTO: REUTERS

SINGAPORE - The pound took a beating but stocks in Asia on Friday (June 9) shrugged off the shock result of the British snap election which saw Prime Minister Theresa May's Conservatives come first but lose their overall majority in Parliament.

With only a handful of seats still to be declared, the Conservatives were predicted to win 319 seats, down from 331 in 2015, short of the 326 that would give them a majority in the 650-member Parliament.

The pound, which started falling early on Friday after an exit poll pointed to a hung Parliament, sank further after the official results confirmed the vote outcome that could plunge British politics into turmoil and delay Brexit talks.

It weakened 1.7 per cent to $1.2738 at 9:54 a.m. in New York (9.54 p.m. Singapore time). It was down 1.8 per cent to S$1.7621 against the Singapore dollar, after being down around 1.4 per cent earlier, a rough two-month low since it closed at S$1.7511 on April 17, according to Bloomberg data.

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The FTSE 100 Index climbed 0.7 per cent. The Stoxx Europe 600 Index rose 0.1 per cent. The yield on 10-year Treasuries rose three basis points to 2.22 per cent.

"The initial exit poll suggest it's been a catastrophic campaign for Theresa May, with the Conservatives on course to fall short of an overall majority," said Oanda senior market analyst Craig Erlam said.

"A hung parliament creates another layer of uncertainty ahead of the Brexit negotiations and chips away at what is already a short timeline to secure a deal for Britain."

The British PM also faces pressure to resign, with betting agencies already taking wagers on whether she would lose her job. May has called the snap election three years early, aiming for a bigger majority to strengthen her hand in Brexit negotiations.

Asian markets were mostly higher, buoyed with some relief overnight after testimony of former FBI director James Comey had no new smoking guns to immediately threaten the administration of US President Donald Trump.

The Straits Times Index was trading 0.3 per cent higher around 1:30pm, after opening up 0.1 per cent, with traders saying many investors were waiting on the sidelines.

Japan's Nikkei index was trading 0.5 per cent higher, Hong Kong's Hang Seng index was down 0.4 per cent, while the Shanghai Composite was flat. Stocks in Australia and South Korea rose 0.8 per cent and 0.1 per cent respectively.

"The reactions have been concentrated in the currency market so far," said IG analyst Pan Jingyi.

For the local bourse, the key focus has been how risk sentiment adjusts to the trio of events - UK vote, Comey testimony and European Central Bank - and specifically how the US market performed overnight, said analysts.

The Dow Jones Industrial Average closed up 0.04 per cent on Thursday, with the S&P 500 gaining 0.03 per cent and the Nasdaq Composite adding 0.39 per cent to a new record.