World Economy

Asia Financial Firms Prepare for Brexit Risks

Asia Financial Firms Prepare for Brexit RisksAsia Financial Firms Prepare for Brexit Risks

The Hong Kong exchange has begun a Brexit impact assessment, and some Asian asset managers are looking to set up new bases in mainland Europe amid growing concerns their operations could be disrupted if Britain votes to leave the European Union in a June referendum.

The central banks of Hong Kong and Singapore told Reuters they were also closely monitoring developments around the June 23 vote. A spokeswoman for the Hong Kong Monetary Authority warned of “significant uncertainties” in the event of an “Out” vote.

The contingency planning highlights concerns that Brexit, as Britain leaving the EU has been called, could have ripple effects in Asia-Pacific by cutting off the UK’s Asian finance investors from the EU financial market. Other regions are also making Brexit preparations.

Opinion polls have pointed to a close vote, though the most recent polls show rising support for Britain staying in the EU.

“A potential Brexit is an issue no organization can afford to ignore,” said a spokesman for Hong Kong Exchanges & Clearing, which took over the London Metal Exchange and its clearing house in 2012.

“We are carrying out an impact assessment for both the LME and LME Clear and are addressing the short-, medium- and long-term implications for both potential outcomes of the UK referendum.”

  Looking at Frankfurt, Luxemburg

The bourse declined to elaborate on its impact assessment, though risk management experts said it would likely cover the legal, regulatory and operational implications of Brexit, as well as volatility scenarios and potential market disruptions.

Asian investors using Britain as their European base said they may establish operational bases in Frankfurt or Luxembourg, fearing an “Out” vote would disrupt their ability to offer services and products across the 28-nation EU.

“There’s lots of uncertainty. If the vote is “Out” would London be a platform for accessing Europe?” asked Sammi Shen, executive director at Shanghai Nord Engine Asset Management Group, a $3 billion Chinese investment management company which set up a London office only last year.

“We would find a European partner or set up an office in Europe: that’s our back-up plan,” she said, listing Frankfurt and Luxembourg as the preferred locations.

Britain’s financial services industry has attracted £100 billion ($143 billion) in foreign direct investment since 2007, or nearly a third of the total, according to financial services lobby group CityUK.

London has also sold itself to Chinese banks as the biggest yuan currency clearing hub outside Asia.