THAI and other Southeast Asian stocks were hit hard by yesterday’s British vote to exit from the European Union, triggering a panic sell-off in most assets except gold, but regional authorities believe the impacts will be temporary.

The Bank of Thailand expects limited direct impacts on trade and investment, but notes that there will be significant indirect risks from the historic divorce due to increased global market volatility in the short term and uncertainties over the possible exits of other EU members.

Supachai Panitchpakdi, former director-general of the World Trade Organisation, said the United Kingdom would be fine outside the EU as it would be able to maintain its status as a key financial centre for Europe because of Frankfurt’s limited capacity and the relatively weaker positions of non-UK financial institutions.

“Britain has been an EU member that has not used the single currency, but it has prospered well. The EU is now like a group of patches of people, not a true federation,” he said.

He expects the Brexit vote will encourage other EU members to consider leaving, particularly Greece and the Baltic states. He also expects greater ease for Asean in striking a free-trade agreement with the UK. Making deals with the EU is complex, given the bloc’s reluctance to reduce its huge agricultural subsidies, he said.

Surin Pitsuwan, the former secretary-general of Asean, said negative impacts were inevitable over the next two years as Britain negotiated to leave the EU, but Asean member states should not panic as the regional grouping was not like the EU.

The Brexit vote rocked commodity markets as well yesterday, as oil and copper prices slumped, but gold hit a more-than-two-year high.

“The effect of this exit is pretty much still a question mark,” said Alex Tiu of AB Capital Securities in Manila, adding that investors would be on a wait-and-watch mode.

The Stock Exchange of Thailand shed 23 points or 1.62 per cent to close at 1,413, while Singapore stocks were down 2.1 per cent; those in the Philippines were down by nearly 2 per cent; Vietnam was down nearly 2 per cent; and Jakarta nearly 1 per cent.

On trade and financial sectors, BOT said there would be limited impacts as Thai exports to the UK were only 1.8 per cent of the total while Thai banks’ direct exposure in the UK and Europe-wide financial sector was only 1.31 per cent of total assets.

The central bank noted that the baht’s depreciation was in line with regional movements, but cautioned that the capital market would be more volatile in the short term, with possible capital outflows from equity and bond markets.

However, in the long run a change in strategies by private companies and other EU trade partners could cause uncertainties in trade and investment, which could stall global economic recovery.

Anusorn Tammajai, dean of Rangsit University’s faculty of economics, said the UK’s status as a financial centre would be weakened as some financial institutions might move to other EU countries.

He said the pound could fall by as much as 20-30 per cent, while the euro should weaken by 15-20 per cent.

“Economic nationalism” would gain momentum, leading to more protectionism and slower growth in global trade and investment.

Isara Vongkusolkit, chairman of the Board of Trade of Thailand, said there could be increased flexibility for the UK to negotiate a free-trade deal with other countries.

Vallop Vitanakorn, vice chairman of the Federation of Thai Industries, said that if other European Union members such as Spain left, there would be more concern over EU integrity.

Businesses, especially importers, should now hedge currency risks with regard to the pound sterling and the euro, he said, noting that Thai exporters would need to look for other potential markets as the EU and UK economies slow.

Commerce Minister Apiradi Tantraporn said the UK was Thailand’s third-largest trading partner among the EU countries. Exports to the market averaged US$3.87 billion (Bt136.7 billion) during the past three years for a trade surplus of $992 million.

NLA members voted 152-5, with 16 abstentions, to support the drafts in principle.

A 21-member ad hoc committee was nominated to look into the bills in details, in preparation for further deliberation by the assembly.

Some NLA members voiced objections to the drafts, stating that they omitted some important elements suggested by an energy panel appointed by the NLA itself to study amendments to the Petroleum Act BE 2514 and the Petroleum Income Tax Act BE 2514, especially on the establishment of the National Oil Company.

NLA member Lt-General Ampon Chuprachum said the National Oil Company would have to be set up to jointly manage petroleum fields under a production-sharing contract (PSC) system with private operators.

Energy Minister Anantaporn Kanjanarat explained that the new laws were urgently required to allow the auction by the end of this year of two major gas-producing fields in the Gulf of Thailand whose concessions expire in 2022-2023.

He said the government was considering assigning the Finance Ministry or an educational institute to study the setting up of the National Oil Company, and thus the petroleum laws could be amended again later if the study supported its establishment.

“We have to make an announcement [to open the auction] at the year’s end. If the operators do not have the confidence to continue their investment, there will be a problem,” the minister added.

Anantaporn said the amended laws would give the government the flexibility to choose between the concession, PSC or service-contract systems for the upcoming auction of the expiring Erawan and Bongkot gas fields.

The current energy bodies could handle the task, without having to wait for the establishment of the National Oil Company, he stressed.

“For the next round of petroleum auction, we can wait for the National Oil Company. There would not be any problem,” he said, referring to the long-delayed 21st round of nationwide petroleum bidding.

Noted non-government organisation activist and NLA member Wallop “Khru Yui” Tangkananurak said he could not vote for the bills, as they set no time frame for the setting up of the National Oil Company.

“This government is no different to other governments, which were manipulated by the old surrounding [interest] group,” he claimed.

He said that after the change in the media landscape due to the fierce competition among digital-TV players, the regulator believed that launching of all 12 planned digital channels for community-based service could be an unhealthy prospect for most of them.

At the practical level, running a community-based digital-TV operation would seem to be more difficult than commercial and public TV broadcasting, because of some of the conditions and limitations imposed on community-based operators under the current broadcasting regulations, he said.

For example, they must secure their own financial support to run a digital-TV station without being able to seek commercial benefits, Natee said, adding: “This seems to be contrary to the fact that they have to be safe and sound enough to serve local people’s needs.”

He raised the issue during a public forum to commemorate the 61st anniversary of the establishment of television service in the Kingdom, organised by the Public Relations Department.

Law amendment floated

“Three or four [community-based] stations should be sufficient for this purpose. Therefore, amendment of the law should be considered by the relevant authorities,” he suggested.

In addition, under Article 49 of the Act on Organisation to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services, the people sector shall be permitted to use frequencies for public interest and non-profit for community service in a proportion of not less than 20 per cent of frequencies allocated in each licensing area.

If his idea were to be adopted, this part of the act would also need to be amended, he said.

Asked about overall progress on the transition to digital-TV broadcasting, the NBTC chief said he believed that by next year, 40 per cent of the country’s households would be able to access free-to-air programmes via digital receivers, compared with 30 per cent now, after the roll-out of digital-TV transmitters in other parts of the nation.

The ministry yesterday reported that exports in May declined for the second consecutive month, by 4.4 per cent to a value of US$17.61 billion (Bt622 billion), resulting in a cumulative decline in the first five months of 1.9 per cent to $86.99 billion.

“The ministry will retain its 5-per-cent export-growth goal as a working target,” Somkiat Triratpan, inspector-general at the ministry and director of its Policies and Trade Strategies Bureau, said yesterday.

“Exports could rebound to positive growth at any time as oil prices recover and the economies in some markets stabilise, mainly in the United States and China.”

The ministry has calculated that if export value in the remaining months is $19 billion to $20 billion, the 5-per-cent growth target could still be achieved. But if export value is about $18 billion to $19 billion a month, the growth figure will be only 2.5 per cent.

The ministry is concerned that the UK electorate’s decision for a “Brexit” from the EU could affect Thailand’s trading eventually. In the short term, however, it is confident that Thai exports will not suffer much, as shipments to the UK account for only 1.8 per cent of the total, and those to the EU less than 10 per cent.

Somkiat said exports in the remaining months should get back to positive territory, as indicated by more imports of capital goods and raw materials for the manufacturing and other export sectors.

In May, import value grew 0.5 per cent year on year to $16.07 billion, the first expansion in 14 months. Thailand’s trade surplus for the month was $1.5 billion.

Import value in the first five months totalled $76.54 billion, a year-on-year decrease of 10.25 per cent and resulting in a trade surplus of $10.44 billion.

Imports of raw materials last month grew by 2.37 per cent.

Somkiat said some countries had started to import more after economic recoveries.

The ministry said last month’s exports increased after some recovery of the global economy and the strong expansion of shipments of industrial goods, particularly vehicles and air-conditioners. Exports of some agricultural products have also recovered, tapioca being an exception because of low demand in China.

Isara Vongkusolkit, chairman of the Thai Chamber of Commerce, is less optimistic than the Commerce Ministry on exports. He said the continuing uncertainty over global economic growth would result in flat Thai export growth this year or a slight decline.

Sterling collapsed more than nine percent to $1.3466, its weakest level since 1985, while the greenback itself slumped below 100 yen for the first time in two-and-half years as traders fled to safety.

In the weeks leading up to Thursday’s historic vote, there had been widespread warnings that a vote to leave the bloc would cause another rout across global markets that would wipe trillions off valuations, just months after a painful China-fuelled sell-off.

And as results came in, the doomsday scenario seemed to be unfolding.

The pound had earlier topped $1.50 following predictions the “remain” group would win but as the “leave” camp continued to post victories around the country, traders put in sell orders. The dollar slumped briefly to 99.02 yen, the first time it has gone below 100 yen since November 2013.

The Japanese unit is considered a safe bet in times of uncertainty and turmoil.

The seemingly likely outcome in favour of exiting has upturned expectations, which had been for a tight race narrowly won by the “remain”, while bookmakers had said there was a 90 percent chance of staying in.

Highlighting the volatility across all markets, betting giant Ladbrokes tweeted: “Without doubt the craziest, fastest moving political betting market in recent history.”

On equity markets Tokyo was down 6.7 percent, Hong Kong tumbled 3.6 percent, Sydney shed more than three percent and Seoul was 1.5 percent off. Shanghai and Singapore each sank 1.4 percent, while Taipei, Wellington, Manila and Jakarta all saw sharp losses.

– Oil plunges –

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However, volatility remains high as analysts say the vote is still too close to call, with much of London — considered in favour of staying — still to return results.

“After the early confidence, we could be getting a dose of realism that’s causing some reasonably skittish market movements,” Jeremy Stretch, head of foreign exchange strategy at Canadian Imperial Bank of Commerce in London, told Bloomberg News.

“It does look like the margin between the two sides is going to be relatively tight, and accordingly sterling volatility is going to remain elevated until we get a more definitive picture.”

With many financial groups believed to have conducted their own exit polls, there is a worry among traders that the fall in the pound could indicate Britain is on its way out of the economic bloc.

In the early hours in Britain, Nigel Farage, leader of the anti-Europe UK Independence Party, declared victory, saying it was the country’s “independence day”.

The prospect of a severe hit to the global economy also hammered oil prices, with both main contracts slumping more than five percent.

“We are seeing oil swept up in the general market nervousness to the vote,” Ric Spooner, a chief analyst at CMC Markets in Sydney, told Bloomberg News.

“Corrections are likely to be fairly shallow in oil because prices will be supported by the fact a balanced market is firmly on the horizon.”

– Key figures around 0330 GMT –

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Pound/dollar: DOWN at $1.3527 from $1.4974 late Thursday

Euro/dollar: DOWN at $1.1030 from $1.1422

Dollar/yen: DOWN at 101.77 yen from 106.53 yen

Tokyo – Nikkei 225: DOWN 6.7 percent at 15,123.44

Shanghai – Composite: DOWN 1.5 percent at 2,848.31

Hong Kong – Hang Seng: DOWN 3.6 percent at 20,110.64

New York – DOW: UP 1.3 percent at 18,011.07 (close)

London – FTSE 100: UP 1.2 percent at 6,338.10 (close)