Dear Valued Investor,

Good day to you.

If you noticed the recent hot topic in the market is no other than Brexit ( Britain Exit ), the news, polls result is all over the newspaper, online financial website.

With the voting is approaching soon ( 23 June 2016 ), Fundsupermart research team has published a new article discussing the Brexit, I have summarized the article for your easy reference. Alternatively, please click this LINK for the full article.

Economic Implication

· Eurozone accounts for 41% of all UK exports with the larger EU accounting for 46%. A departure from the EU is likely to deal a rather hefty blow to the UK's exports as trade tariffs will rise in the wake of a Brexit result.
· A potential reduction of investments in the UK as its access to the EU would be uncertain.
· A potential rise in unemployment as foreign corporates uproot themselves from the UK to seek direct EU access.
· The anticipated depreciation of the British Pound (GBP) following a Brexit will also lead to higher levels of inflation

Investment Implication

BREXIT Outcome

· It is difficult to tell if Brexit will materialize or not, it is advise that investor to expect certain level of volatility.
· A sell-off in UK equities is possible when Brexit is to happen, affecting bond performance as investors demanding an additional risk premium to hold UK-related assets.
· Equities that focused on domestic market may as well as those exposed to European Union are likely to be impacted.
· Internationally exposed stocks may benefit from the anticipated weaker GBP.

BREMAIN Outcome

· Investors could expect the GBP to rise against many other currencies.
· UK equities and corporate bonds are likely to benefit from positive price appreciation.

While the risk of a Brexit poses some short term risks (volatility) and a potential repricing to European equities, we believe that UK equities are at greater risk than Eurozone equities at large. We retain our 2.5 Star - Neutral rating on the region and caution investors to brace themselves for volatility for either result.