Direct impact on Malaysia from Brexit is manageable, says Affin Hwang Capital

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KUALA LUMPUR (June 27): AffinHwang Capital Research has maintained its “Positive” rating on the FBM KLCI and said the UK voted unexpectedly in favour of exiting the European Union (EU) in the Brexit referendum by a margin of 51.9% to 48.1%.

In a strategy note today, the research house said there are no positives from the outcome.

It said the consequences on the UK and the EU, if the contagion effect spreads, would drag down the already precarious global growth.

“Thankfully, we estimate that the direct impact on Malaysia is manageable in terms of the macro picture and earnings.

“However, our biggest fear is if this prompts further EU disintegration and impairs the credibility of the Euro, triggering a global recession that would put pressure on the Brent price due to demand destruction.

“This would directly impair Malaysia’s fundamentals. Bottom line: global financial markets are entering a period of volatility while the risk profile for Malaysia has also increased,” it said.