The Impact of Brexit on the Southeast Asian Stock Market

Introduction

This research purposes to investigate the impact of Brexit on the Southeast Asian Stock Market, countries like Singapore, Thailand and Vietnam.

Britain's plan to depart from the EU is a cause for concern across the Asian market. The announcement to vote for Brexit affected Britain's political future resulting in political uncertainty. In particular, a significant impact was felt on the Sterling Pound: in just a few minutes after the announcement, the Pound fell by more than 6% hitting its lowest level against the US dollar. The outcome of this drop and political doubt affected the Asian markets.

In an unpredictable and volatile global order in today's times, business decision-makers have to have a grounded understanding of the various drivers of global change; political, economic and environmental, just but a few (Gilpin, 2016).

Research Rationale

The Brexit Political uncertainty affects stocks markets volatility. Unstable political systems of a Nation like Thailand and Vietnam has been associated with a significant loss of wealth. Similarly, the monitoring of stocks behavior is effective in the determination of the spillover effect of political events ion the real economy, such an impact would be felt in the southeast of Asia financial market uncertainty. Economic agents make decisions based on political environments. The link between these two is from the fact that factors affecting economic performance such as employment, consumption, investment, and saving decisions are significantly affected by the political climate of that country.

In the financial markets (stocks market), political uncertainty fosters financial risk that is then likely to be reflected in the interest rates, stock market behavior, and market risk. Although there is adequate literature about the impact of political uncertainties on the stocks market, there is limited literature on the study on Brexit concerning the resultant economic and political instability. Research has shown that Brexit generated significant distortion in the stocks markets in the sotheast Asian Markets. Therefore, investigating the correlation between the political and economic uncertainty in the UK and the southeast Asian stocks market is important and will help create information on how to increase interdependencies for global financial markets.

All trade activities, both export and import or globalisation, are operated with institutional environments that are composed of sets of political and legal rules. The rules define assurances and expectations about the business actions by defining and enforcing conventions on the forms of competition and corporation allowable and non-allowable, and property rights. To trade internationally, the political-legal environment must be built to facilitate fair trade, open markets prohibiting any forms of protection and to ensure non-discrimination.

Research Question

Based on the research rationale established for this study, the main research question that the proposed research will seek to respond to is;

What is the role of global politics in global business in the case study of Brexit and the Asian Stock Market?

To respond to this main question, the responses to the following questions will be used;

What are the political-legal business environment factors surrounding Brexit that influence the Asian stock market?

What is the impact of political uncertainty following Brexit on the Asian stock market?

What is the connection between Brexit and the Asian financial market performance?

Research Objectives

The proposed research will seek to achieve the following research objectives;

To evaluate the political-legal business environment factors associated with Brexit that affect the southeast Asian stock market.

To explore political uncertainty following Brexit and how it affects global business with regard to the southeast Asian stock market.

To determine the role of global politics in global business with regard to Brexit and its connectedness to the southeast Asian financial market performance.

Literature Review

Interaction between Global Politics and Global Business

Businesses around the world are concerned about the impact of Brexit. Even with the Globalisation of business, Organisations must observe the local regulations and rules of the countries within which they operate (Scherer and Palazzo, 2011). Governments have been able to directly enforce regulations based on their political philosophies even though this is slowly being changed by the Internet basically because businesses and their customers are having easier and less restricted access to each other via the Internet. Nevertheless, local governments still have the right and the ability to strong-arm global businesses into abiding by the local regulations and as such, businesses operating globally monitor and evaluate the political climate of countries the operate or hope to venture in future (Gilpin, 2016).

The interaction between global politics and global business can be viewed from two perspectives and these are; the influence of global politics on global businesses and the role of international business in global politics. The influence of global politics on business trade can be examined from many different positions such as the impact of political factors in business, international government trade relations, the impact of government intervention in international trade, and the legal political business environment (Arvis et al., 2016)

Businesses that seek to invest globally must focus and the political systems off prospective countries to determine how the respective system affects the economy or the industry they intend to venture into. It is paramount that businesses asses how the local rules and regulations will influence their businesses. For instance, barriers or ease to enter or exits a country's market affect a firm's intentions to invest and operate in a country. Businesses asses the political risks and stability before committing to invest in a country. Global businesses must assess the political system to evaluate;

The stability of a governments,

The stability of the rules of businesses upon a power shift,

The longevity of rules based on a constitution or a legal national document,

The involvement of a government in the private sector

The suitability of a legal environment to enforce and challenge rules and policies

The government's legal, political and economic transparency in the decision-making process

In theory, any political system poses a risk to businesses concerning the above factors. However, some political systems provide stable business environments by enhancing political stability which is considered a key factor in attracting foreign investment (Cohn, 2016). Some of the areas that foreign investors must take into consideration include government invention and control, and the enhancement of free markets. Businesses are attracted by a political system where rules and regulations survive changes and shifts in political power (Eckhardt and Poletti, 2016). In countries with such a political system, changes are a reflection of a shift in the economic environment such as a recession but not a change in political regimes.

The Legal-Political Business Environment

The legal-political environment is one of the least predictable business environment. The cyclical political environment is the result for most democratic governments as re-elections are carried out every few years (Adekola and Sergi, 2016.). Pressure groups seeking to be elected tend to change the government policies that as a result affects the business environment. Political systems are different in different countries and regions and as a result, the political impact on the business environments are different (Arvis et al., 2016).

While structural political factors which include elections, regime power shift, and treaty renewals, are critical factors affecting business in general, there are different methods in which political issues can impact international business operations. People identify with those related to their political identities (Jensen and Snaith, 2016). These factors are even extra tough to analyse and greater unpredictable than the structural political factors, and in these days virtual global wherein things move viral within minutes they've received a very vital status.

The dispute over territory is especially sensitive as territories are not simply demarcations lines on a map, there is an entire social and psychological dimension that links people to territories (Young, 2016). This has deep implications on people's identities and their ties to social and political companies. Feelings of belonging to a territory, the place of origin, of entitlement to a selected territory have fuelled endless conflicts and these are and prime motivation for social and political motion (Skjærseth and Wettestad, 2016).

Every international business expansion is exposed to some risk and therefore it is impossible to avoid risk. It can virtually be mitigated by way of research and an appreciation for general know-how that leads us to assess how we engage with the rest of the world (Lechner, 2016). While retrieving statistics is simpler than it has ever been, discerning authoritative material from misleading records can be intricate, so using and researching a couple of resources both online and in the paper layout is critical. With regards to facts on political issues, this is even more vital since political problems can very effortlessly become partisan issues and think about the records through the powerful lenses of political ideology (Jensen and Snaith, 2016).

Research Methodology

Research Philosophy

The proposed research will adopt an epistemology positivism research philosophy. Epistemology allows the researcher to classify what is constituted as knowledge and which is not. It is a research philosophy that focuses on what is known to be true (Creswell and Creswell, 2017). A positivism deductive approach will be employed for the epistemology approach. In positivism, a phenomenon is reduced into simple elements, therefore, helping to establish causality and law-like generalisation. Facts and credible data are only acquired through observable phenomena. In Positivism research, the researcher's role is limited to data collection and the interpretation of this data. Positivist research often adopts a deductive approach (Creswell and Poth 2017).

Research Approach

A deductive approach is based on the development of a hypothesis or hypotheses which are based on already existing theory and the researcher then designs a research strategy to these the hypotheses.

In a deductive approach to research, a causal relationship implied by a theory is likely to be true in many other cases. Using a deductive design, the researcher can test if the relationship is true in general circumstances. The deductive approach is based on the deducting of conclusions prom proposition and premises of theory. Deductive research starts with an expected pattern which is then tested against observations (Sekaran and Bougie, 2016). The advantage of using a positivist approach is that it allows the researcher to make predictions and explanations and that research is made empirically observable and induction should only be used to develop hypotheses that are tested in the research process. Similarly, adopting a positivism deductive approach allows the researcher to explain causal relationships between variables and concepts and also allows the researcher to generalise the findings.

The research will adopt a qualitative ground theory research method. Qualitative research is designed to enable the researcher to acquire the perception of a target audience. Results of qualitative research are mainly descriptive that allows the exploration of how propositions and premises are drawn. Qualitative research method facilitates data to be collected in multiple forms that help solve complex issues by breaking the research issues into meaningful inferences. The ground theory is a qualitative research approach that facilitates the generation of a theory explaining at a broad conceptual level, an interaction concerning a topic (Queirós, Faria and Almeida, 2017).

Data Collection

The research will utilise secondary data. Using data collection adopts a systematic procedure to gather qualitative data. The proposed study will utilise existing data from published materials. Proposed materials include peer-reviewed journals accessed Internet search engines.

Materials will be selected based on an inclusion and exclusion criteria which will be composed of the following factors;

Year of publication not later than 2009

Journal title with the keywords; global politics, Brexit, Brexit, and the Asian stock market international business, global business, globalisation, political environment, legal environments, political systems, legal-political business environment factors.

Peer-reviewed journal

No specific geographic location for the study

No specific study design or setting

Articles are written in the English language

Articles with ethical approvals and without conflict of interest.

Data Analysis

A thematic analysis method will be utilised in the proposed study. Thematic data analysis is used in the analysis of qualitative data allowing data to be analysed based on the principle themes and concepts. The themes are used to reduce them into the key study concepts. Using the thematic data analysis method for the proposed research is appropriate because the study will use a ground theory approach (Gliner, Morgan and Leech, 2011). The analysis will be grounded in the concepts generated from the study hypotheses. Thematic data analysis involves the interpretation and structuring of a mass of data to identify relationships among groups of data by classifying content.

Following the stages for a thematic data analysis method, data will be organised based on the content development of the research issues. After these themes will be generated and categorised based on the study hypotheses or objectives (Jackson, 2015). It will them be coded to allow comparison and to identify relationships between the political system and environment to trade and business relations. Using content analysis, emergent understandings will be tested and alternative explanation generated.

Ethical Issues

This research will be qualitative and will utilise secondary content data gathered from published materials. Therefore, there are limited ethical issues expected. The main ethical issue is self-plagiarism; a plagiarised paper will be a deception to the readers. To avoid this ethical issue all the information gathered from published work will be referenced or described using the researcher's words (Jackson, 2014). The other ethical issue is accuracy and fairness in the review of published scholarly data. Redundant and non-transparent results will not be reported as data. Finally, the precision of citations and references will enhance data accuracy.

Expected Results

It is expected that the impact of Brexit on the Southeast Asian stock market will be negative/adverse. However, the impact’s significance will be an interesting thing to investigate further.

Timeline

Gantt Chart

References

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Arvis, J.F., Saslavsky, D., Ojala, L., Shepherd, B., Busch, C., Raj, A. and Naula, T., 2016. Connecting to Compete 2016: Trade Logistics in the Global Economy--The Logistics Performance Index and Its Indicators. World Bank.

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Skjærseth, J.B., and Wettestad, J., 2016. EU emissions trading: initiation, decision-making, and implementation. Routledge.

Young, A.R., 2016. Not your parents' trade politics: the Transatlantic Trade and Investment Partnership negotiations. Review of International Political Economy, 23(3), pp.345-378.