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Natanicha Sangprakai

Mr.Abel Cadias

English 10 / 10:03

May 16, 2017

How Brexit Affects Thailand Stock Market

The Brexit, a situation in which England leaves European Union (EU), would decrease

Thailands stock market. The purpose of this research report is to argue that the Brexit affects

Thailand's stock market. The importance of this research report is to raise awareness from the

effect of Brexit to Thailands stock market. The pieces of information found in this research

report are based on eight sources. First, Alex Hunt & Brian Wheeler write an article entitled

Brexit: All you need to know about the UK leaving the EU describes general information

about Brexit. Next, an article by Achara Deboonme, entitled Brexit will have limited impact

on Thailand shows the impact of Brexit in Thailand. Third, an article entitled How will

Brexit impact Thailand? from DBS Bank explains the impact from Brexit. Fourth, an article

entitled Bank of Thailand warns of greater Brexit risks talks about risk of bank in Thailand.

Fifth, an article entitled Brexit and its implications in Thailand discusses the implication

from Brexit. Sixth, an article entitled In the Wake of Brexit: What to Expect Across Thailand

and ASEAN Economies provides information about the expectation. Moreover, an article by

Gemma Purnell How will Brexit affect retirees living in Thailand? narrates about the effect

of Brexit to retirees people. Lastly, an article by David Harper Forces That Move Stock

Prices introduces the forces that affect stock market

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What is Brexit?

Brexit comes from the words Britain and exit. A referendum in which everyone of

voting age can take part to decide whether the UK should leave or stay in the European

Union. After the vote, UK decided to leave EU. It made a lot of changes in England. The first

change is the UKs prime minister, Theresa May. Alex Hunt & Brian Wheeler (2017),

reported that Prime Minister David Cameron does not want to leave the EU after having an

agreement with other EU leaders that would change the terms of Britain's membership.

However, it is not easy for UK to leave the EU now because of the Article 50 which is a plan

for the country that wants to exit. It was signed up by all EU states which became law in

2009. It has to take two years to agree with Article 50. Theresa May, the UK new president

run this process on 29 March 2017 which means the UK is expected to leave on Friday, 29

March 2019 but it can be extended if all 28 EU agree. Prime Minister Theresa May in 2016

said that Leaving the EU would be better than signing up to a bad one. However, the UK is

still under World Trade Organisation rules, which means the customs checks and tariffs.

Some people argue that the UKs trading partners would not want to start a trade war while

others said that the UK will get a higher cost for selling and buying goods abroad. Another

change is the fall of pounds value. This means that imported goods will be more expensive

which is good for other countries. Also, the CPI inflation rate rising to 2.3%, its highest level

for three and a half years. This is a sign of more cost pressures set to feed through in the

months to come.

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The Effects of Brexit

 Thailand will not have a lot of impact from the Brexit. According to Narit

Sathapholdeja (2016), there will be a greater financial change in the currency and bond

markets, which could impact the cost of funding, but not an economic shock. The UK is

Thailands third-largest export in the EU countries. The average export to the market is $3.87

billion per year, while the shipment value average is five times higher. In short-term, the

fluctuation in the currency will happen until the market can adapt themselves, said Kobsak

Pootrakool (2016). But in long-term, it might challenge the global economy, which includes

the risk that other members in EU may consider to exit. The risk of economic in Thailand is

the unsustainable recovery cycle in Thai business sector. Since the poll was revealed, the SET

Index dropped to 1,393.83 (-2.9%) intraday, then rebounding to close at 1,413.19 (-1.6%).

The British pound fell harshly by 8% to 48.3 Thai baht on that day from 52.7 baht in the day

earlier and the euro also fell, but a less percent which changes from 40.1 baht to 39.1 baht,

DBS Bank (2016). After the separation, both British and EU will have to take a time to

reform and restructure their economy system which will not affect Thailands economy and

tourism but some of the tourists from EU and British might pause their planned for overseas

trips for a short period. The instability in European economy may cause investors move to

Thailand to invest in Thailands stock market. Stanley Kang (2016) noted that Most of EU

and UK companies that invest in Thailand are multinational companies which do so during

periods of uncertainty at home. This could be an opportunity for Thailand to attract investors

if it can maintain political stability. This may cause the investors move Thailand but it also

two sizable threats. So, Thai investors should stay alert.

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How will Thailand Protect its Economy?

 A key consideration over the coming months will be how the EU and UK relieve their

perverse effect. The Brexit will heighten uncertainty in global economic and spark a big

change in the financial market and capital flows. However, Thailand is strong enough to stand

in the capital flow volatility. Thailand will face with a limited amount of short-term external

debt. Europe has 17% of Asias total export market, this will cause challenges for Asias

export markets. Not only the market, but also the tourism. Thailand is one of the top

destinations for European tourists. According to Narit (2016), Thai businesses should be

aware of this before borrowing or investing, even in stock, bonds, or etc. The key risks are

the political uncertainties and they are now underpriced. Also, the Thai business sector was in

the unsustainable recovery cycle before. The Brexit is not going to affect the stock market

directly.

It will happen because of the companies in the UK. After UK left the EU, every

company in England has to pay tax for export goods and cannot accept employees from other

countries in the EU. So, most of the companies even the UKs owner company, HSBC,

decided to change its main companys location to either Ireland or Netherland because of the

tax that England has to pay. On the other hand, Thailand has a limit impact because the

trading rate of Thailand and England is only 8% of Thailands exporting rate. The only things

that need to be concerned are the investor because of the instability in the stock market. Isara

Vongkusolkit (2016) noted that the challenges for trading and the fluctuating exchange rate

are that Britain will make free-trade agreement easier. In particular, if Thailand would like to

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negotiate FTA with Britain. Instead of protecting Thailands economy, the situation is likely

to benefit more than effect because Asia has the lowest impact among the other continents.

The only point that needs to beware is the tourism because Thailand might lose tourist from
Europe and England for a short period, so Thailand should focus on tourism from other

countries.

Conclusion

The purpose of this research report was to argue that the Brexit affects Thailand's stock

market. This research report concluded that the Brexit positively affected Thailands stock

market in both short-term and long-term because Thailand and UK did not trade with each

other a lot. The problems which will be affected is the tourist from the UK might decrease

and UK companies in Thailand might be unstable in the stock. After the Brexit, the UKs

currency fell down a lot which is an opportunity to invest in Forex. Also, Thailand will make

the free-trade agreement with the UK easier. Thailands stock market might be increased

because due to the insecure condition of the UKs stock market, the investor might change to

invest in Thailands market. This research report recommends that how Brexit is an

opportunity on develop Thailands economic and trade market.

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References

Achara Deboonme (June 20, 2016). Brexit will have limited impact on Thailand. Retrieved
March 24, 2017 from http://www.nationmultimedia.com/news/business/EconomyAnd
Tourism/30288566

Admin (August 15, 2016). In the Wake of Brexit: What to Expect Across Thailand and
ASEAN Economies. Retrieved March 28, 2017 from http://silklegal.com/in-the
-wake-of-brexit/
Alex Hunt & Brian Wheeler (March 30, 2017) Brexit: All you need to know about the UK
leaving the EU. Retrieved March 28, 2017 from http://www.bbc.com/news/uk-politics
-32810887

Business Desk (June 24, 2016). Bank of Thailand warns of greater Brexit risks. Retrieved
March 24, 2017 from http://asianews.network/content/bank-thailand-warns-greater
-brexit-risks-20720

David Harper (2016). Forces That Move Stock Prices Retrieved March 28, 2017 from
http://www.investopedia.com/articles/basics/04/100804.asp

DBS Bank (June 27, 2016). How will Brexit impact Thailand? Retrieved March 24, 2017
From https://www.dbs.com/aics/templatedata/article/generic/data/en/GR/062016/
160627_insights_how_will_brexit_impact_thailand.xml

Gemma Purnell (June 29, 2016). How will Brexit affect retirees living in Thailand? Retrieved
March 28, 2017 from http://retirethailand.info/how-will-brexit-affect-expat-retirees
-living-in-thailand/

Prnews (June 27, 2016). Brexit and its implications in Thailand. Retrieved March 24, 2017
from http://www.bangkokpost.com/forum/viewtopic.php?f=69&t=101143