Brexit Invoked: What's next for markets and investors?

BANGALORE: Hi-Lo…Hi-Lo…Hi-Lo…Hi-Lo…Hi-Lo…, sirens went back and forth through the entire Europe yesterday! All hell broke loose, when a certain question asked by the European Union’s referendum got an affirmation from the British citizen resident in the UK. The question was “Should the United Kingdom remain a member of the European Union?” So, what is a European Union (EU), EU referendum, and Brexit?

The European Union is made up of 28 countries that came together for trade and security in 1958 after World War 2. It originally started with six founding members: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. The EU now includes the 19 eurozone countries who share the single currency.

The normal business of any government is based on their manifestos. However, some issues are seen to be of such importance they should be put to a national vote outside of a general election. For these issues, EU referendum is used where any citizen of that country can vote for or against the issue. The latest being in 2014, when the Scottish voted in a referendum against independence. The latest EU referendum asked the British citizens whether or not they want to be a part of the EU. 52% people voted for not staying in the EU, and thus England had to exit from the EU. (British + Exit = Brexit)

Repercussions followed the Brexit vote! David Cameron resigned from his PM’s position! The value of the British pound dropped more than six percent against the Euro! Regulations, Financial services, Immigration, Trade and Manufacturing, all took a blow! The 'Brexit' vote has proven one thing - idealism can't survive in this not-so-ideal world reports The Economic Times. So, what’s next for markets and investors? Let’s find out!

Biggest risk-off market? Not now!

To hit the global markets in recent times, market across the globe saw Brexit as the biggest risk-off event. But now, analysts expect markets to slip deep into the red in the coming days ahead. And so the market won’t be the biggest risk-off! The 50-share Nifty50 has slipped below 8,000!

Knock-Knock! Who’s there? Global Recession!

The fifth largest economy in the world, UK may slip into recession following the Brexit vote. Both the World Bank and the IMF had warned about this possibility before. Its impact could hit UK and send ripples across the continent

Money has a new color, Yellow!

Brexit will immensely trigger gold benefits as experts say that gold will soon rally towards the $1,400 mark. Gold will emerge as the preferred asset of choice during a period of slack in the risky assets like equities. "Both equity & currency markets are heading for volatile times & this will lead to flight to safety in asset class like gold," said Gaurang Shah, VP, Geojit BNP Paribas.

War ahead! Currency War!

Brexit has ensured that the pound has already crashed 11 per cent in Asian trade, and Yen and the US Dollar index have been rallying up by 5 and 3 per cent respectively. Rupee will also face a collateral damage just like other emerging market currencies. The Japanese Finance Minister said Japan will intervene if Yen appreciates drastically, some think that level may be 95 to the Dollar. If that happens that has the potential to trigger a major currency war starting with the Chinese getting enough support to devalue the Yuan.

The British may have their sovereignty back after going for the Brexit. It would be easier for them to control their borders, and set limits on migration numbers now. And they would also be free from EU legislation on measurements and working hours.! But, It could be speculated that Brexit will do more harm than good. Only time can reveal.

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