(Harvest) Financial markets around the world this week are reeling a post-Brexit hangover. The United Kingdom had voted to leave the European Union (EU), leaving many investors surprised, including me. I had believed the negatives of the United Kingdom leaving the EU appeared to outweigh the positives, and I thought the British people would see it that way, too. The uncertainty of the situation and what comes next hit all markets in the wake of the vote, and emerging markets were not exempt, with the MSCI Emerging Markets Index experiencing a sharp decline.
However, I believe once the initial shock wears off, the longer-term impact should be more limited since emerging markets’ trade and investment are widely diversified; the amount of trade with the United Kingdom is relatively small for most emerging market countries.
