The Motley Fool

An Investing Lesson: Brexit And Its Impact On SMRT Corporation Ltd

Today, every online business news portal I’m looking at or every news channel I’m tuning into is talking about one thing: United Kingdom’s vote to leave or stay in the European Union. The votes for a Brexit have been cast and right now, they are being tallied.

To the surprise of many, it seems that there is a real possibility that the United Kingdom could be leaving the European Union. At the time of writing (10:40 am), slightly more than half of the tallied-votes are in favour of the United Kingdom to exit.

A possible Brexit has caused stock markets in Asia to tumble this morning. For instance, Singapore’s market bellewether, the Straits Times Index (SGX: ^STI), is down by 1.16% at the moment. The pound sterling has also depreciated by up to 5% against the US dollar since the polls were closed.

If you are truly worried about your investments now, let’s take a step back together and think of the impacts that a Brexit may have. Here are some of my thoughts on one particular company which can be used to illustrate a broader investing concept.

The company in question is SMRT Corporation Ltd  (SGX: S53), one of the largest public transport companies in Singapore. It runs train, bus, and taxi services here. Unlike ComfortDelgro Corporation Ltd (SGX: C52), which has operations in many other countries beyond Singapore, including in the United Kingdom, SMRT is solely a domestic company.

So, what might be the possible impacts to SMRT’s business if Singapore’s previous colonial master decides to leave the European Union? Is it reasonable to expect fewer people to take public transport in Singapore? Is it reasonable to expect SMRT to suffer a higher or lower number of service-breakdowns?

Thing is, what matters to SMRT are the number of passengers it can handle and how reliable its service is. These are factors that have no real link at all to what happens in the United Kingdom. And yet, SMRT’s shares are down by 1% at the time of writing, similar to what’s happening to many other stocks in Singapore and other parts of Asia.

This illogical behaviour seen in SMRT’s shares is actually the norm when it comes to the stock market. And crucially, such behaviour can be to the advantage of an investor who can remain calm and patient.

For more investing insights and to keep up to date on the latest financial and stock market news, you can sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.