Biggest one-day fall this year for JSE on Brexit vote

The JSE closed sharply weaker on Friday as the fallout from Britain’s exit vote from the EU hammered global markets‚ with more volatility and uncertainty expected over the short term.

Banks and financials were hard hit. General retailers and property stocks also slumped. Gold was the only place to hide‚ with the gold index gaining 11% after trading 18% higher at one point.

S&P Global Ratings warned that it would be reviewing the UK ratings potentially affected by the referendum result.

story_article_left1

Despite the “leave” vote‚ any exit was likely to be a drawn-out process‚ while treaties or other arrangements were negotiated between the UK and the EU regarding their future dealings‚ S&P said.

European banks took a beating‚ with Barclays plc down nearly 30% at one point‚ while other investment banks were also negatively affected‚ Dow Jones Newswires reported.

Brexit had triggered a long period of uncertainty for the UK‚ Europe and other global partners‚ with effects of differing severity depending on the maturity and willingness of politicians in the UK and Europe to negotiate new terms on trade arrangements‚ Nedbank economists said in a note.

Nedbank said further complications were likely to be calls for a new referendum in Scotland to leave the UK as well as calls in several other EU countries to follow the UK’s example.

“In the short term there has been a flight back into safe-haven currencies and markets‚ an unwelcome development in already jittery markets‚” Nedbank said.

story_article_right2

The UK was likely to invoke clause 50 of the Lisbon Treaty only sometime after October when the new prime minister took over. That would start the countdown to exit over a maximum of two years.

Over this period‚ apart from new trade and other deals having to be negotiated with the EU as well as other partner countries‚ the UK would potentially have to change a host of EU-inspired domestic legislation‚ Nedbank said.

The JSE all share closed 3.56% lower at 51‚679.70 points and the blue-chip top 40 lost 3.97%. Financials dropped 4.78% and banks were 3.72% lower. General retailers dropped 3.63% and industrials shed 3.41%. Resources closed 2.75% lower while the gold index rallied 11.4%.

The all share was 0.88% lower for the week and is now 1.94% higher for the year.

The Dow Jones industrial average was 2.17% lower soon after its opening. At the JSE’s close the UK’s FTSE 100 was 2.26% weaker‚ the French CAC 40 had lost 7% and the German Dax was down 5.7%.

story_article_left3

The gold price was 4.7% higher at $1‚315.11 a fine ounce and platinum had added 1.45% to $979.46 an ounce. The oil price had given up 4.9% to $48.45 a barrel.

Strategy head at Ashburton Investments Mark Appleton said from a South African perspective‚ any weakening of the global economic environment or an increase in risk-off sentiment was not good news.

“Export performance could suffer and the rand would likely become more volatile‚” he said.

Some local shares may be more negatively affected by Brexit than others‚ including Steinhoff due to its UK and European exposure‚ he said.

Richemont was another local share that could be hit as costs would rise on an appreciation by the Swiss franc against the euro. “BHP Billiton may be affected by dollar strength and lower global growth.”

 On the positive side‚ Mediclinic and British American Tobacco may be more resilient‚ Appleton said.

“Mediclinic had high exposure to safe-haven Switzerland‚ and British American Tobacco was globally more diversified‚” Appleton said.

story_article_right4

Among individual shares on the JSE‚ Anglo American ended the day 8.01% lower at R135.72 and Glencore plunged 11.31% to R28.93.

Sasol dropped 2.47% to R396.47.

ArcelorMittal slid 13.68% to R7.38.

Even rand hedges were not immune‚ with British American Tobacco off 1.07% to R902.97‚ while SABMiller shed 4.71% to R871.88. Richemont was 3.34% weaker at R87.33.

Sibanye did best of the major gold firms‚ rocketing 13.26% to R49.45‚ while Gold Fields soared 12.61% higher to R68.34.

Investec plc lost 9.65% to R93.50‚ Barclays Africa was 4.64% lower at R146.07‚ FirstRand shed 4.03% to R44.34 and Standard Bank was 3.02% down at R126.05.

Old Mutual dropped 7.51% to R38.40 and Sanlam relinquished 3.43% to R60.56.

story_article_left5

Among retailers‚ Truworths shed 6.93% to R87.69 and Shoprite dropped 2.61% to R165.87.

Steinhoff was 5.38% lower at R85.15.

In the property sector‚ Capital & Counties‚ with its large exposure to the British market‚ plummeted 17.79% to R63.75 and Intu slumped 15.23% to R57.65.

MTN shed 5.94% to R139.20‚ Naspers lost 2.91% to R2‚165 and Mediclinic was 0.25% softer at R203.

- TMG Digital/BDlive