HONG KONG - Asian stock markets brushed off big early losses Tuesday and the pound bounced as traders began betting on a fresh round of stimulus measures to mitigate the effects of Britain's shock decision to tear itself away from the EU.
Regional markets began the day sharply in the red as uncertainty over the vote -- which many fear could precipitate the end of the United Kingdom and even the European Union -- revived selling after Monday's surprise bounce.
A lack of haste among Britain's leadership is adding to a sense of drift in the country, with Prime Minister David Cameron saying he will stand down in the autumn and hand responsibility for exiting the EU to his -- as yet unknown -- successor.
While Cameron does not want to trigger the process to remove Britain before he leaves, he is facing pressure from other EU leaders to hurry the process up ahead of a crucial Brussels summit Tuesday.
However, speculation swirled around trading floors Tuesday that authorities across Asia will step up to prevent another market rout just months after a China-fuelled sell-off carved trillions off valuations.
"We are probably going to have looser policy settings than before (last Thursday's) vote," Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., told Bloomberg News.
"You'd have to suspect that the bias is to the downside for global growth and as a result that stimulus remains in light of increased uncertainty."
News reports said Japan's Prime Minister had been urged to unveil economy-supporting measures, while South Korea's central bank unveiled a US$17 billion (S$23.15 billion) injection and lowered its growth outlook for the country in response to the Brexit fears.
Global markets suffered a mauling on Friday in reaction to the British decision to break away from the EU after four decades -- upending the European political and economic order -- and analysts warned of a possible global recession.
Key indexes in New York and Europe have seen huge withdrawals since Friday -- US$974.2 billion was scythed off Wall Street's S&P 500 in two days, the third worst back-to-back stretch in history, according to S&P Dow Jones Indices.
However, in afternoon Asian trade Tokyo was up 0.4 per cent, having fallen two per cent in the morning, while Seoul also reversed to sit 0.4 per cent higher.
Shanghai pared losses to end the morning only marginally lower and Hong Kong was 0.9 per cent down at the break while Sydney gave up 0.8 per cent.
Hong Kong and Sydney had both suffered hefty losses in early trade.
There were also gains for Singapore, Wellington, Taipei, Jakarta and Bangkok.
S&P Global Ratings credit analyst Terry Chan wrote that he saw limited long-term damage to the region.
"Brexit's market impact is likely to be significant in the near term, particularly in terms of stock market and currency volatility," he said.
"The medium-term impact on Asia-Pacific markets, however, is likely to be limited as investors make decisions based more on economic and financial fundamentals rather than just sentiment.
"If market volatility were to spike and prolong, we believe Asia-Pacific regulators are likely to take action, including extending short-term liquidity."
The pound rose to US$1.3315 in Asia, from US$1.3228 in New York and much stronger than the US$1.3121 hit earlier Monday, which was its lowest since September 1985.
But Japanese banking giant Nomura warned it could fall to US$1.25 owing to worries about Britain's economic future.
Standard & Poor's and Fitch each cut Britain's top sovereign credit rating, making it more expensive to borrow cash in international markets.
Oil prices climbed on bargain-buying, having lost around 10 per cent since hitting 2016 highs above US$52 earlier in the month.
West Texas Intermediate rallied 1.3 per cent at $46.92 and Brent also added 1.3 per cent to US$47.77.
Tokyo - Nikkei 225: UP 0.4 per cent at 15,368.39
Hong Kong - Hang Seng: DOWN 0.9 per cent at 20050.93 (break)
Shanghai - Composite: DOWN 1.20 points at 2,894.50 (break)
Pound/dollar: UP at US$1.3315 from US$1.3228 Monday
Euro/dollar: UP at US$1.1044 from US$1.1022
Dollar/yen: UP at 102.00 yen (S$1.36) from 101.99 yen
New York - DOW: DOWN 1.5 per cent at 17,140.24 (close)
London - FTSE 100: DOWN 2.6 per cent at 5,982.20 (close)