Brexit sows even more mud­dle in mar­kets

Financial Mail - Investors Monthly - - Contents - Maarten Mit­tner

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.