FSC: Market effects of UK election only short-term

The Financial Supervisory Commission (FSC) expects market fallout from the surprise result of the UK's general election on Thursday to be short-term. Prime Minister Theresa May had called an early election in the hope of increasing her Conservative party's parliamentary majority. Instead, her majority was wiped out, with major gains for the main opposition Labour party.

UK stocks dropped on the election result, with the pound also falling by 1.5% against the US dollar. The deputy head of the FSC, Cheng Cheng-mount, said last year's Brexit referendum in the UK was a black swan event. But he said Thursday's election vindicated expectations that the process of the UK's withdrawal from the EU would not be smooth.

"Even if the Brexit process is not smooth, it is still a long process. The financial market's reaction will be over in a few days, it won't be a long-term shock. The lowest the pound has been against the US dollar was 1.22, at the moment it's 1.27, the position is not too dangerous," said Cheng.

The FSC calculates the financial exposure of Taiwan's banks in the UK market at around NT$1.31 trillion (US$43.5 billion), the majority in insurance. Cheng said the nature of Taiwanese banks' operations in the UK meant there was not too much to worry about.

Source: Radio Taiwan International