What Is The Market Panicky About?

Many stock markets around the world have not been doing well this week. For instance, the Straits Times Index (SGX: ^STI) in Singapore has fallen around 2% this week while in Hong Kong, the Hang Seng Index has slipped by 3.5% or so.

It’s not always clear what is affecting the markets at any given moment, but one of the big topics in the financial world right now would be the possibility of Britain leaving the European Union – or what’s otherwise known as the Brexit.

Thing is, is the Brexit even relevant to an investor in Singapore?

The lowdown on the Brexit

As mentioned earlier, the Brexit is the term used to describe Britain possibly leaving the European Union. The European Union is an economic and political partnership between 28 European nations. The EU has its own commission, council, parliament, and even justice system.

Britain has long had a special status within the EU. For one, it is able to retain its own currency, the pound, instead of using the Euro like the rest of the union. This allows Britain to have more flexibility when managing its monetary and fiscal policies.

Reasons for leaving

Some members of Britain’s parliament are arguing that the price of admission into the EU for Britian is heftier than the benefits that can be obtained.

Moreover, leaving the EU would allow Britain better control over its borders and immigration policies.

Reasons for fear

Some commentators are worried that if Britain does exit the EU, it would affect its businesses and make it more difficult for trade to happen between the country and other members of the EU.

Does it matter to investors in Singapore

So here’s the thing. For investors in Singapore, what happens to Britain and the EU hardly seems like a concern to me. Of the 30 constituents in the Straits Times Index, most of have very little – if any at all – business interests in Europe. They are mostly companies that operate in Singapore or within Asia.

So, the next time an investor in Singapore is worried about the Brexit, I’d have to ask: Why are you worried?

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned above.