How Asia is weathering and winning post Brexit


With Asian investors looking to develop hotels in the West and Western brands seeking opportunities in Asia, the Brexit is causing some concern for developers on both sides of the equation. 

Immediately after the vote, the pound fell by more than 10 percent in Asian trade and emerging-market currencies declined sharply as investors pulled out of risky assets. In just a few days, falling currencies wiped out as much as $3 trillion of market capitalization worldwide.

But by Monday, business was back on, and one Asian investor had staked a claim on a UK hotel, betting millions on the country's enduring tourism appeal. Hong Kong-listed Magnificent Real Estate subsidiary King Express Development paid more than 70 million pounds for the Travelodge London Kings Cross Royal Scot Hotel.

At the time, William Cheng Kai-man, chairman of Magnificent, said that the uncertainties "provided the company an ideal opportunity to get into the high-demand hotel sector in London, and the falling currency has made the deal more attractive...These are inherent advantages and are not related to whether England remains in the EU or not. The cheaper currency will bring more tourists and investors to London." Cheng added that the big drop in the currency value was a huge advantage.

By Tuesday, Asia's markets closed higher on the expectations that the effects of the vote may be short-term.

Different Nations, Different Reactions

China, which has seen its own economic woes in recent months, has seen its wealthiest business professionals seek international investment opportunities rather than domestic ones, driving capital to the West. Chinese real estate transaction volume in western markets reached $30 billion in 2015—double the amount seen in 2014, according to property consultancy firm Knight Frank. And at least for the time being, the vote has not had as severe an effect in China as elsewhere in Asia. On Friday, the main Shanghai Composite benchmark only fell 1.3 percent. But even though the People’s Bank of China, which manages the currency’s daily exchange level, pledged on Friday to keep the yuan “basically stable,” the Brexit's impact on global economies sent the yuan to its weakest level in more than five years.

In South Korea, the financial community is wondering how they will be able to conduct business with Britain if the country is no longer a party to the free-trade agreement reached between Korea and the EU five years ago. President Park Geun-hye is reportedly urging ministers to come up with alternate schemes for making up for the potential damage of Brexit to Korean commerce and industry.

But for all the concern, policy makers in Japan, South Korea and India are not reporting a significant impact from the vote in terms of their respective countries' real economies. While a direct impact on Asian economies from Brexit is unlikely in the longer term, businesses in some major Asian economies (India and Japan in particular) will be affected.

This can be a benefit for some other nations that have not seen as much attention in recent years as the larger economies. A Shanghai-based finance executive told Barrons recently that investors were "sensing better opportunities" in smaller Asian nations such as Cambodia and Vietnam. A long-time Cambodia hand said Phnom Penh, the capital city of Cambodia, is "teeming" with economic development, including a Raffles hotel, a Sofitel and an Intercontinental.