Still, it is still too early to accurately predict how Asian economies will respond immediately to the Brexit.
There will likely be some pressure for lower rates in Australia and New Zealand. ANZ Research’s existing view on the RBA is of persistently low inflation narrowly favouring a rate cut in August. The Brexit could place additional pressure on the RBA to cut if continued volatility materially dents confidence.
In China, although the Brexit is unlikely to affect the immediate economic outlook, ANZ is still penciling in one more additional RRR cut for 2016. China will likely exercise both its conventional and unconventional monetary policy tools in response to the development.
Chinese Premier Li Keqiang visited the PBoC on 20 June and he stated China should maintain its current monetary policy stance. What he might have told the PBoC officials could be how to react to the Brexit.
For Singapore, the direct trade exposure to the Brexit is very small but the event risk surrounding the seismic shift was never going to be an economic one. Rather it is a political and markets risk, darkening an already uncertain global back drop.
For example, the EU accounts for less than 10 per cent of Singapore’s total trade but the UK accounts for 1.31 per cent of goods trade. Even with trade being 300 per cent of GDP, this is not a significant enough number by itself to sway Singaporean exports or GDP off its already weak profile.
It is important to remember Britain is not leaving the EU immediately. This referendum has triggered a process that will play out over the next two to three years and economic agents and financial markets, in the long run, will have ample time to adjust to an EU no longer including Britain.
Of probably greater importance for the global economy is the sharp rise in uncertainty over the future of the EU and the drive towards deeper EU integration.
At this stage it is impossible to quantify the negative impact a rise in political uncertainty across the EU could have on growth. Whatever it is it will not be positive and could lead to greater caution from businesses and households.
That could arguably lead to delayed investment and hiring while encouraging households to raise their savings rates.
Contributed by a team including: Brian Martin, Head of Global Economics, Markets Research, Glenn McGuire , Chief Economist, South Asia & ASEAN; Raymond Yeung , Chief China Economist (Acting); Felicity Emmett, Head of Australian Economics; Kieran Davies, Economist; David Qu, Markets Economist and Khoon Goh, Head of Asia Research at ANZ.