UK’s departuredrives KLCI down

PETALING JAYA: Like other global financial markets that were stunned by Britain’s bye-bye to the European Union (EU), Bursa Malaysia’s KL Composite Index lost 5.93 points or 0.36% to close at 1,634.05.

European shares, led by the region’s banks, suffered the full force of the Brexit, falling by 7%.

The decision also led to the British pound suffering its biggest one-day fall in history, plunging over 10% against the US dollar to levels last seen in 1985.

While the ringgit strengthened 4% to 5.70 against the pound, it weakened 2% against the US dollar at 4.10.

The term “Brexit”, which refers to the country’s exit from the EU, was coined by merging the words “Britain” and “exit”.

Britain will be the first member to leave the EU after the “Leave” campaign secured about 52% of the vote during the referendum yesterday.

The last referendum was held in 1975.

EU, a 28-country economic and political bloc, was set up after World War Two to encourage economic co-operation.

Supporters of Brexit see the EU as a barrier for its trade outside the bloc, and believe it is holding the country back by imposing too many rules on business.

The exit is also seen as a way for the country to regain full control of its borders and to limit migration into the United Kingdom.

In Malaysia, the immediate impact of Brexit was the weaker ringgit against the US dollar, falling at a pace last seen in the Asian financial crisis of 1997/1998.

However, the weaker pound is good news to parents of the many Malaysian students studying in colleges and universities there, as this means more affordable tuition fees.

Malaysian property developers with ongoing projects in Britain also do not expect to be affected by Brexit.

Among the major projects involve a consortium of Malaysian developers – SP Setia Bhd, Sime Darby Bhd and the Employees Provident Fund – which has undertaken the redevelopment of the Battersea Power Station in London into apartments, offices, shops and retail units, with a gross development value of £8.7bil.

Bank Negara, in a recent statement, had said it was monitoring the impact of Brexit and would remain vigilant to any potential emerging risk and challenge to the domestic financial markets.

It said that Malaysia’s financial markets were well positioned to face any major volatility from Brexit.

Following yesterday’s vote, Britain is expected to submit an application to leave the EU, after which it will have two years to negotiate an exit.