Special: Brexit puts Singapore on wormap

Singapore’s Minister of Foreign Affairs, Dr Vivian Balakrishnan: spoke about the High Speed Railway during parliamentary debates on the 2016 budget. Hong Phuc FOSSASIA /Wikimedia Commons

British voters have decided on Leave. The impact on the entire global financial markets is appalling. The DOW has fallen by more than 2%, S&P500 by more than 2.3% and NASDAQ by more than 2.7% just hours after Brexit occurred.

(Entire global financial market in red)

The market is in paranoia as investors see Oil prices plummet by more than 4%. Gold as an instrument that measures the demand for safety has increased by more than 4% during this time. One of the world’s safest instruments, the US 10 year Government Treasury yield has also fallen more than 9%.

Except for fear, impact of Brexit is unclear

The impact is clear. Brexit has brought fear into the hearts of investors across the world. Business leaders have also issued statements hoping to calm down investors. GE CEO Jeffrey Immelt reassured global investors that GE will continue to stay committed to EU and UK and that the 22,000 employees in the UK will continue to focus on delivering great outcomes for customers. In other sectors, Brexit has a more profound impact. The planned merger of Deutsche Boerse with the London Stock Exchange Group is at risk of collapse. All these points to the possibility of a new, second HQ for finance. Previously, London was always a close second behind New York as a global financial centre. Global banks have remained in UK even though the cost of operating in the UK was increasing, and that demand for professional services was increasingly shifting to Asia. With the Brexit, analysts have reported that banks will likely reconsider their base in London.

ASEAN cities given a chance to woo businesses away from London

The implications of that is significant for ASEAN business centres Singapore, Kuala Lumpur and Jakarta. Outside of China, Singapore has the best change to take on the new leadership role in the financial markets. The sinking pound is creating amazing opportunities for Singapore. It has been reported that money changes across the country ran out of pounds as Singaporeans sought to exchange for pounds. The signal is clear – Businesses and citizens in Singapore will pounce on such opportunities in the long term. As UK currency falls, businesses invested in UK will face lower gains when their profits are translated to Singapore dollars. But it is clear that this impact will be dwarfed by the benefits when global HQs start considering a move from London to Singapore. This means more jobs, more investors and more deals in Singapore and ASEAN.

Leaders in Singapore chose to be conservative with their options. PM Lee Hsien Loong expressed that it was still too early to tell the impact of Brexit on Singapore. He qualified his statement, adding that there will be increased uncertainty. Surely, UK will have to start rebuilding ties with the major powers of the world. Foreign Minister Vivian Balakrishnan expressed the same sentiments, assuring the public that UK-Singapore ties will remain strong.

Opportunities to build ties with UK without waiting for EU

This unprecedented event gives ASEAN leaders a chance to reopen discussions on how they want to build ties with the UK. In fact, UK has never been fully involved in the EU. Before Brexit, UK opted out of the common currency scheme and also opted out of the passport free Schengen Agreement. The time is ripe for Singapore to step up to challenge London as the stronger financial centre. This is also a great opportunity for ASEAN nations to deeper relationships with UK rapidly, without having to wait for EU consensus.