· A Black Swan event occurred today – the majority of the British people chose to leave the European Union (EU) in referendum. While this in itself does not guarantee that a split is inevitable, it begs the question of what is the implication for emerging Asia should it occur.

· From an economic growth perspective, demand from the UK will certainly weaken, especially considering a weaker sterling impact. Amongst the countries, Vietnam has the highest exposure, although most of the exports are essentials and inelastic, limiting decline. India comes second in terms of exposure. South Korea has the least exposure to the UK. Beyond the direct UK impact, many EM Asian countries have to consider the indirect consequence of a more subdued outlook regarding EU demand. Within Asia, China and Vietnam are most exposed to EU’s expected slower demand.

· And to safeguard growth, EM Asian central banks will likely adopt a more dovish stance. In that regard, the PBOC to deliver one more RRR cut for China and one more rate slash of 12.5bps by Taiwan. India may take advantage of Rajan leaving end of the summer and low global rates to deliver further cuts. In sum, with a more subdued global growth outlook, rates in EM Asia will likely go lower in the months ahead.

Click here to access the full report