Jun 2016 Financial News

Brexit will have impact on HSF

Jun 27, 2016

Former finance minister Larry Howai says there would have been an immediate impact on T&T’s Heritage and Stabilisation Fund (HSF) after the UK’s vote to withdraw from the European Union on Thursday.

He said the assets of the HSF were held in fixed income securities and equities, all of which would have been affected by the collapse of markets globally.

USA Today reported that the US stock market suffered its worst drop in ten months. Meanwhile, Reuters stated that global stock markets lost about US$2 trillion in value on Friday, while sterling suffered a record one-day plunge to a 31-year low.

Howai said that impact would have been compounded where assets were held in sterling or other non-US$ denominated assets.

“The same holds true for the investments in which our foreign exchange reserves are held. Some of the effects could have been positive where falling interest rate expectations could have positively impacted values of fixed income securities,” Howai stated in a letter to the editor.

Another area to be monitored, Howai said, was the international value of the US dollar.

According to him, given this country’s current TTD/USD policy stance, it could cause the price of non-USD imports, especially motor vehicles to fall, which could increase the demand for foreign exchange.

He said it can also work against the competitiveness of our nonenergy exports to countries other than the US and so, could worsen the competitive position of exporters.

“The movements in the currency markets will therefore need to be monitored closely to determine the impact on our currency and foreign exchange strategy,” he added.

Howai also identified concern for potential foreign investments and the drop in oil prices.

He said the global economy had been very soft with only the US and the UK among developed economies showing good growth.

“In short, the effect of Brexit could be a turn to a recession in the global economy which will affect potential foreign direct investments on a global basis and in T&T,” he stated.

Source:
Trinidad Guardian, A14
Sunday June 26, 2016