Much has been said about how a U.K. exit from the EU could hurt the British economy. But the bigger point confronting investors may be what it does to the rest of the world.
If there's one near-definite result that experts can safely predict around a Brexit, it's this: A U.K. vote to leave the EU would increase the amount of uncertainty in markets. Since no concrete precedent exists for a Brexit or anything like it, market-watchers are predicting a global flight to safer assets. And that, in turn, would likely include an investor pullback from the world's emerging economies.
"We believe there is significant room for downside in the event of a leave vote," Yianos Kontopoulos, strategist at UBS, wrote to clients Wednesday.
In terms of which emerging markets, economic research consultancy Capital Economics says the nations likely to be hardest hit are those with the highest current account deficit as a percentage of GDP. Names that fit the bill include Colombia, South Africa, Peru and Turkey, which run deficits in excess of 4 percent of GDP.
"These are the economies that are most reliant on external financing and capital outside of their country for spending. Any acceleration in foreign outflows could really hurt these countries," Capital Economics said. Others that could take a hit include Mexico, Argentina and Brazil, all of which run a deficit of more than 2 percent of GDP.
Simon Quijano-Evans, the head of emerging-market research at Commerzbank, agrees.
Latin America "is next in line with regard to export exposure to the EU, while the whole of [emerging markets] and particularly the more open economies of Asia would be hit by secondary effects from any negative spillover a Brexit scenario would have on global growth," Quijano-Evans said.