The UK’s decision to leave the EU is the beginning of a long process, and there are heightened uncertainties on many fronts, not making it easy to quantify the impact on asset prices. For Chinese equity investors we highlight two areas that we believe are somewhat more straightforward:

　　China is less directly exposed and has ample policy ammunition: China has limited direct trade (2.4%) and FDI (1.2%) links with the UK (Figure 1; also see Asia’s UK exposure, 24 June). Chinese authorities may have the greatest policy room among major economies to combat any negative impact on the domestic economy post-Brexit, including both monetary (an elevated RRR of 17% and foreign reserves of US$3.2trn; Figure 2) and fiscal policy (a relatively low public-debt-to-GDP ratio at 44%; Figure 3).

　　Additional DM monetary easing likely: Intensified uncertainty post-Brexit may keep the Fed at bay and further delay the next rate hike (Figure 4). Other DMs may add monetary accommodation. Our UK economist expects the BoE to cut rates by 25bps in August, and our Europe economists see the ECB extending QE and holding more TLTRO2 auctions (see Focus Europe: What you need to watch next, 24 June). Our rates strategists lower their outlook and now see 10-year UST trading around a midpoint of 1.25% through 2H16 (see US Fixed Income Weekly, 24 June).