The Impact Of Brexit On The Australian Stock Exchange And Global Economy: An Essay.

Business Research Topic

Describe about the Business Capstone Project for The Australian Stock Exchange.

The topic is the impact of Brexit, the global economy and the impact on the Australian Stock Exchange. The major objective of the final research proposal is to develop an understanding about the impact of Brexit and the global economy. The research will make summarize for future research on this topic. The significance of the topic is that it will help to examine the consequences of Brexit that is especially prudent for the individuals in Australia (MacDonald 2016).

 A dip in the Australian Stock Exchange is essentially just the commencement of what could be a exhaust of liquidity from Australian markets caused by a British exit from the EU. There are two key methods to look at what a Brexit could denote for the economy of Australia. The first method is concerned with trade while the second method deals with the amount of money that could leave or enter the country after Brexit. The Brexit indeed satisfies all the criteria for a most important economic event (Cumming and Zahra 2016).

As opined by Pisani-Ferry et al. (2016), the vote by the UK to leave the European Union has cast a shadow over the international economy. The depth of the shadow relies critically on how the rest of the world acts in response. The major takeaway of the referendum is that independence as well as nationalism now opponent economics as drivers of voter sentiment. This is likely to slant politics in the direction of less openness as well as less conventional policies. Brexit led to preliminary drops in pound as well as led to severe global stock markets however; it was not disastrous. Due to Brexit, the S&P ASX200 has completed 3.3 percent down at the close, smearing off roughly $50 billion in value. On the other hand, the Australian dollar has dropped down to 3.4 percent to 73.4 US cents.

The Australian dollar tanked and around $50 billion in shares has been smeared out on the domestic market after results showed Britain decided to leave the European Union. The ASX 200 extended losses to close 3.2 percent lower to around two-and-a half month and the investors escaped in groups after the news. The Australian dollar lost almost 3 percent to 73.8 US cents. The ASX market decided to sell off previously when the Leave campaign overhauled Remain along with high instability as investors faced hesitation. Speculation in the Australian market will progressively focus more on the weakest links in the EU. Due to Brexit, several companies in Australia that derived a proportion of their proceeds from the UK also dropped. This mostly included Amcor that lost approximately 2.7 percent and News Corp that lost almost 1.7 percent (Ramiah, Pham and Moosa 2016).

Background Information

Brexit led to the fall of most of the bluechips by between 2 and 3 percent. On the other hand, the big banks in Australia plunged by between 2.3 and 2.6 percent while on the hand, Wesfarmers and Woolies did a slight better by dropping around 1.8 percent. CSL on the other hand did a little worse as it dropped by 3.3 percent and Telstra lost by 2 percent. Mesoblast was however considered as the biggest loser as it dropped by 42 percent. The financial services sector that comprises of mostly 40 percent of the UK trade in Europe will be hit badly as World Trade Organization treaties do not cover it. As per the reports, it has been stated by HSBC that if the UK votes to leave the EU, they are likely to shift thousands of workers to Paris in order to make them operate in Europe (Dhingra et al. 2016).

As opined by (), Brexit led to worries related to financial panic that was quite identical to that of bankruptcy of Lehman Brothers. The Bank of England and its overseas counterparts indicated a willingness to provide banks what they need to cover any provisional cash outflow. On the other hand, yields on British government bonds went down. The fall in the price of stocks indicated a new risk that surrounded the global economic viewpoint. The vote to leave the EU conducts in two or more years of vagueness as Britain renegotiates its trade correlation with the rest of the world. The uncertainty due to Brexit had led to depression in the business investment. It has been predicted by some economists that the exit of the British from the EU is likely to knock down 1 percent to 6 percent of the UK GDP (Gross Domestic Product). On the other hand, the International Monetary Fund forecasts a hit to international economic grow outside the E.U. of zero to 0.2 percentage point (Wilcock and Miller 2016).

Brexit is likely to cause a downward effect on the Australian share market that is likely to make an already average year a little worse. As a result, stock sell-offs, are likely to carry a deflationary outcome. In Australia, the rate of interest is already low that in turn had forced the Reserve Bank to lower the rates of interest. The Reserve Bank of Australia is likely to face deflationary pressure from Brexit. As far as mining is concerned, the major reason that will influence the Australian economy is risky investment that includes commodity prices. The rates of interest are heavily relied on variation in goods (Kierzenkowski et al. 2016).

Research Question and Hypothesis

According to the studies made by the Global market research of the Commonwealth bank, the British Pound is likely to decline up to 10 percent. The positive part is that the Australian dollar is likely to increase to 8.3 percent against the British Pound however; it is likely to fall to 2.5 percent against the US dollar. The share market of Australia is likely to fall along with other international markets due to uncertainty that is surrounding the collision of the Brexit. It is also likely to trigger economic crisis, as the banks are likely to have increasing difficulty sourcing offshore financial support (Mendez-Parra, Papadavid and te Velde 2016).

As opined by Anderson, Juden and Rogerson  (2016), with the seizing up of the financial markets, the big banks in Australia is likely to find it difficult to secure the enormous amounts of offshore funding that is required by them. With the fall in the share prices, the government guarantees will be called for again. A decline in the pound will act as a negative result for most of the individuals in Australia who have assets in the UK. The expenditure power of the British tourists will also be lowered. The shaky international economy is likely to have a severe impact on the Australia’s trade in the long-run. The position of evade funds, banks and other monetary institutions in gambling on currencies in over-the-counter markets (not usual currency markets) in times like this, also adds to the hesitation. Brexit will affect the trade of the Australian companies with the European Union through the UK, in the longer run. 

1. What will happen to the big banks in Australia, if the financial markets seizes due to Brexit?
2. How will the individuals in Australia be affected with the fall in pound?
3. How will the trade in Australia be affected due to the impact of Brexit?
4. Will money flow out of Australia due to fall in the Australian dollar?
5. Does the impact of Brexit on the global economy depend on leaders?

H0: Brexit has negative impact on Australian Stock Exchange as well as on global economy

H1: Brexit has positive impact on Australian Stock Exchange as well as on global economy

Research Philosophy

Research Philosophy is considered as an immense topic that deals with the source, development as well as nature of knowledge. However, the idea related to knowledge might appear to be profound. There are two types of data that can be collected in this case. The researcher can make the use of both primary and secondary data as well as data analysis to answer each research question that helps to create knowledge (Taylor, Bogdan and DeVault 2015).

While addressing the research philosophy, it is imperative for the researcher to be aware and formulate his thoughts as well as beliefs. The viewpoint of a study will imitate the important assumptions of the author and these assumptions provide as base for the research approach. There are four main research philosophies within the scope of business studies in particular. The four main research philosophies includes pragmatism, positivism, realism and interpretive (Baskerville and Wood-Harper 2016).

Research Methodology

There has always been a key point of debate while the researcher makes the choice between qualitative and quantitative research methods. Qualitative research mostly indicates principally investigative research.  It is used to increase an understanding of fundamental causes, views, and incentives. It helps to provide insight into the dilemma or helps to expand thoughts or hypotheses for probable quantitative research. Qualitative Research is also used to discover trends in consideration and views, and dive deeper into the dilemma. Qualitative data collection methods differs using unstructured or semi-structured methods. Some of the most common methods that are used while conducting qualitative research methods are conducting interviews, group discussion and participation (Smith 2015).

Another most imperative method that can be used by the researcher is quantitative research. It is used to measure the problem by way of creating arithmetical data or data that can be converted into useable statistics. This method also helps to quantify behaviors as well as views while conducting research and simplify results from a superior sample population. In order to formulate facts and uncover samples in research, this method makes the use of measurable data. Some of the most common methods that are used while conducting quantitative research methods are online surveys, mobile surveys, face-to-face interviews, online polls, longitudinal studies as well as paper surveys (Goertz and Mahoney 2012).

The researcher will mostly make the use of quantitative research to conduct online surveys in order to find out the rate at which the Australian Stock Exchange had been affected due to Brexit. In this case, the researcher also requires making the use of primary data as it is considered as the original research that is accomplished with the help of first-hand investigation. On the other hand, secondary data is widely obtainable from a third party. However, in order to get data related to financial statements, it is important for the researcher to use primary research methodology. With the help of primary research data, the researcher will conduct surveys, questionnaires and interviews. Primary data can be quantitative, focused on statistics and measurements, or qualitative, as when approaches or views are gathered and studied (Bryman and Bell 2015). 

References

Anderson, M., Juden, M. and Rogerson, A., 2016. After Brexit: New Opportunities for Global Good in the National Interest. Policy Paper, 89.

Baskerville, R.L. and Wood-Harper, A.T., 2016. A critical perspective on action research as a method for information systems research. In Enacting Research Methods in Information Systems: Volume 2 (pp. 169-190). Springer International Publishing.

Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.

Cumming, D.J. and Zahra, S.A., 2016. International Business and Entrepreneurship Implications of Brexit. British Journal of Management, 27(4), pp.687-692.

Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. Brexit: the impact on UK trade and living standards. Centre for Economic Performance, LSE.

Goertz, G. and Mahoney, J., 2012. A tale of two cultures: Qualitative and quantitative research in the social sciences. Princeton University Press.

Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The Economic Consequences of Brexit.

MacDonald, S., 2016. The impact of Brexit on the UK’s reputation, influence and soft power. Cultural Trends, pp.1-7.

Mendez-Parra, M., Papadavid, P. and te Velde, D.W., 2016. Brexit and development.

Pisani-Ferry, J., Röttgen, N., Sapir, A., Tucker, P. and Wolff, G.B., 2016. Europe after Brexit: A proposal for a continental partnership. Bruegel External Publication, Brussels.

Ramiah, V., Pham, H.N. and Moosa, I., 2016. The sectoral effects of Brexit on the British economy: early evidence from the reaction of the stock market. Applied Economics, pp.1-7.

Smith, J.A. ed., 2015. Qualitative psychology: A practical guide to research methods. Sage.

Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research methods: A guidebook and resource. John Wiley & Sons.

Wilcock, J. and Miller, A., 2016. The truth and consequences of Brexit: could a catastrophe for academia be an opportunity for publishers?. Insights, 29(3).