Asian tigers will keep UK businesses agile: Why the Brexit negotiations should push British firms eastward for trade partnerships

 
Shih-Huei Ang
This general view from 'The Peak' shows
Financial centres such as Hong Kong will want to build greater ties with the UK post-Brexit (Source: Getty)

As the City readies itself for the official start of the Brexit process today, many would be forgiven for worrying about how perceptions of political and economic uncertainty will impact how international investors view the UK.

The old adage says that “investors do not like uncertainty” – and whatever your view of the opportunities and risks of Brexit, it undoubtedly involves uncertainty.

However, when we surveyed the views of investors across key Asian markets last month, their views were rather different to what you might have expected.

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Our survey of the Asian financial community, released today, examined the views of top investors, sellside analysts and corporates in Hong Kong, Singapore and Kuala Lumpur. What we found was that, far from shying away, most investors were keen to increase their investment in UK-listed businesses.

This does not mean that Asian investors are ignoring the risks of uncertainty in the UK. In fact, a third of respondents thought that Brexit posed a major obstacle to investment. But seen in the broader global context, uncertainty in the UK does not necessarily stand out.

Indeed, for many of these investors, part of the attraction of the UK lies in the status of London as a location of relative stability in comparison to the alternatives.

Generally, the respondents were cautious on their home markets as well as on China, due to concerns about global protectionism.

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And, while they showed a similar interest in the US, there was coolness on the Eurozone, with 60 per cent of respondents expecting further countries to exit the EU.

And, in addition to this relative strength, the UK, and UK-listed companies, still maintain many fundamental attractions for international investors.

With this in mind, Asia would seem to be an attractive location for companies seeking investment – a strong source of capital keen to increase exposure to the UK. And yet our survey also found that this is an area where UK companies seem to be missing a trick.

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In fact, rather than shifting their focus to international markets, our survey suggests that UK companies have become less – not more – visible to Asian investors over the last year.

While investors in Asia were keen to invest in Britain, they did not feel they knew as much as they would like to in order to be able to make those decisions.

Investor roadshows in general are shorter than they were a decade ago and with high levels of liquidity in the market, corporates may have felt that they often have not needed to look far afield for sources of capital. And it is certainly the case that it is often easier to make your investment case to those already familiar with your market and business than to educate a new group of investors on the other side of the world.

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This, however, is to take a short-term view. As central banks look to tighten monetary policy, funding costs are likely to rise in the coming years – albeit slowly – so companies may soon find alternative sources of finance increasingly valuable.

Furthermore, we have already seen plenty of examples in Asian investors’ work in the UK of the sort of long-term, patient, supportive capital that many companies will welcome as they look to build their business. There are many Asian investors that would provide a great fit for many UK company share registers – if they knew more about the opportunity.

For UK companies looking for investment and opportunities in the run-up to Brexit, investors in Asia are more receptive than they might expect. They could do much worse than testing the waters on the opportunities in the region.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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