Brexit sows even more muddle in markets

June was Brexit month as British voters convincingly decided to leave the European Union (EU). It came after years of wrangling and EU scepticism.

The decision caused already jittery global markets to weaken as the consequences of Brexit appeared uncertain.

The JSE all share index ended the month 3.13% down, with losses all over the board ranging from industrials and resources to banks and property stocks.

Local shares with British ties, notably in the property sector, had a torrid June. Capital & Counties was a big casualty, losing 26.7%, and Intu Properties shed 17.2%.

Old Mutual dropped 5.2% in June and SABMiller lost 13.4% in the month on speculation that the Anheuser-Busch InBev takeover was in trouble, which later proved to be unfounded.

With Barclays plc tumbling more than 20% after Brexit, local subsidiary Barclays Africa’s retreat was relatively pedestrian at 1.28% for the month. Standard Bank kept its chin up, actually gaining 3% in June.

Steinhoff, with its Frankfurt listing, was another casualty, ending June 8.6% in the red. Brait has extensive UK operations and was 12.2% lower in June.

The Dow Jones ended the month marginally up by 0.80%. The Dax lost 5.7% in June and was down 9.8% for the year at end June. The Paris CAC 40 lost 5.9%, down 8.6% for 2016.

Brexit was not bad for British equity markets. The FTSE ended the month 4.39% higher as the tumbling pound supported exporters.

The pound lost 8.2% to the US dollar at end June and later fell to 15-year lows.

The yen gained 7% against the dollar as the market regarded the Japanese currency as a safe haven from the European turmoil.

The rand firmed from R15.73 to R14.72 against the dollar in the month and gained 13.7% against the pound from R22.80 to R19.61.

The relatively stronger performance by emerging markets in June was a notable exception to the turmoil caused by Brexit. The benchmark MSCI emerging markets index ended the month 3.3% up, supported by a 6.3% rise in the Brazilian Bovespa and a 1.95% rise in the Indian NSE index.

Many emerging markets offered higher yields in the bond market with fundamentals also improving as Brazil reduced its current account deficit and India became lenient on rates.

Towards the middle of July markets became more positive about Brexit. Some analysts cautioned it could be misplaced optimism as Brexit was expected to cause further contraction in UK GDP growth.