Britain’s vote to leave the European Union is not a big deal for most of Asia and could well lead to investors shifting money eastwards after the initial panic, argues Josh Crabb, head of Asian equities at UK fund house Old Mutual Global Investors (OMGI).

From a big-picture, global asset allocation perspective, Europe has become more difficult to navigate now, but Asia looks better, on a relative basis, he told AsianInvestor. Asian equities – particularly emerging-market stocks – are now cheap, he added, and the region has discounted most of the issues that Europe is now facing.

There were big falls in several Asian stock markets on Friday, because the selling was indiscriminate, Crabb noted: Indonesian equities, for instance, were down 6%, despite having minimal exposure to the UK.

By contrast, most Asian equity markets were fairly flat yesterday, though quite a number of individual names rose substantially, he said. “We were taking advantage in Indonesia, India and Vietnam.”

OMGI has been adding positions in those three markets, which have little exposure to the UK or the EU and could benefit from any local stimulus driven by concerns over Brexit, said Crabb.

There were also intra-day buying opportunities in stocks with direct exposure to the UK and European markets, he noted. For instance, HSBC – listed in both London and Hong Kong – got hit very hard in Hong Kong, falling 12.5%, but then rebounded to regain 6.5%.

US equities and high yield to rebound?

There are Asia-based investors, however, who are optimistic about buying opportunities in US equities and high-yield bonds, as well as in European high yield, in the next six to 12 months. Vincent Bourdarie, Taiwan chief investment officer of Nomura Asset Management, is one such individual.

US equities were very expensive as of Friday, he noted, with an average price-to-earnings ratio of 17x, but after an expected drop of 5-10% in the coming few weeks, they would be a good buy.

For bond investment, Bourdarie predicted investors would initially rush to government bonds – notably US Treasuries and eurozone core issuers such as Germany – for risk protection. As those yields drop, investors will then turn to investment-grade bonds, mostly in dollar but also in euro, he said.

High-yield bonds are likely to be sold off like equities in the first two weeks. But when the market gradually recovers amid an environment of monetary easing, he argued that investors would turn to high-yield bonds for higher returns.

European high yield, either in US dollar or euro, will be preferable on account of capital gains, he said, given the continued asset buying of the European Central Bank.

US high yield has been very expensive, noted Bourdarie, but he forecast a good buying opportunity after the anticipated sell-off in the coming weeks, which would see yields rise to around 8.5%.

Asian high-yield bonds are defensive, but not as attractive in terms of capital gains as their US counterparts, he noted.