Tumbling share prices in Hong Kong on Thursday after the US Federal Reserve (Fed) announced it was keeping interest rates on hold showed that investors' primary concern has shifted to worries about global economic health that could be harmed by Britain's vote on whether or not to leave the European Union (EU) in next Thursday's referendum.

It's not what the Fed did, but what its chairperson Janet Yellen said that matters most to investors worldwide. The possibility of the UK quitting the EU, or Brexit, was one of the factors that led the Fed to keep interest rates on hold, she said.

The UK referendum, Yellen said, "could have consequences for economic and financial conditions in global financial markets". Brexit, in turn, could have consequences for the US economic outlook, she added.

If Britain votes to stay in the EU on June 23, the Fed will still have to weigh the US economic indicators, especially those for employment and prices, to decide on rates at its next meeting in late July.

Although most economists expect the US jobless rate to stay at below 5 percent for the rest of the year, new job creation is showing signs of slackening. Latest figures indicate that US job creation in May fell to its lowest level in more than five years after having declined the previous month. At the same time, the annualized inflation rate has stubbornly stayed at below the Fed target of 2 percent.

For now, at least, Brexit is the market's boogeyman. Many business leaders have warned that Brexit can have dire consequences that extend beyond global financial markets. The latest warning came from Germany's Minister for Foreign Affairs Frank-Walter Steinmeier, who was quoted as saying that Brexit could lead to the EU's eventual disintegration.

It's hard for anyone to predict the outcome of the UK vote. Every recent opinion poll suggests it'll be too close to call. The uncertainties it has created have prompted investors to run for cover, triggering a wave of sell-offs in major financial markets, including Hong Kong.

(HK Edition 06/17/2016 page9)