Currencies, stocks and bonds plunged across Africa after the U.K.’s vote to leave the European Union triggered a slump in oil and other commodities and sent investors scurrying for safe assets.
South Africa’s benchmark share index fell the most since December 2008 on a closing basis, led by stocks with listings in London and by diversified mining companies. The rand dropped to a record against the yen and by the most since 2008 against the dollar before paring the decline, while yields on dollar bonds from Ghana to Kenya rose. Gold miners gained by the most since 2008 as the precious metal, seen as a haven in times of turmoil, soared.
“We’re going into a very difficult, very volatile time with prices moving in all sorts of directions; lots and lots of uncertainty,” Ron Kiplin, a money manager at Cratos Capital in Johannesburg, said by phone. “And we still need to see what impact really, from a South African perspective, it has on emerging markets.”
The victory for the “Leave” campaign may weigh on African economies as prices of raw materials fall, with the Bloomberg Commodity Index dropping 1.8 percent on Friday as crude oil fell 5.1 percent to below $50 per barrel. Gold rose 5.4 percent to $1,325.02 an ounce, the most on a closing basis since November 2008. The debate over the U.K.’s EU membership has dominated investor sentiment throughout June, with appetite for riskier assets having built up over the past week as bookmakers’ odds suggested the chance of a so-called Brexit was less than one in four.
The rand slumped 8 percent against the greenback before paring the decline to trade 4.4 percent weaker at 15.0730 by 2:03 p.m. in Johannesburg. It fell 7.7 percent to 6.8728 yen after plunging as much as 13 percent. It gained 4.1 percent against the pound to 20.6186.
South Africa’s currency is the most volatile among 24 emerging-market peers, according to data compiled by Bloomberg, suggesting it often trades as a proxy for risk sentiment. The rand’s one-month implied volatility against the dollar climbed to levels last seen in January, overtaking that of 22 other emerging markets. A British exit from the EU could shave about 0.1 percentage point off South Africa’s economic growth, according to researchers from North-West University. The U.K. is the fourth-biggest destination of South African exports, according to data compiled by Bloomberg.
“We’re just caught up in the bloodbath more than anything else,” said Phillip Pearce, a dealer at Treasuryone in Pretoria, the South African capital. “The rand always overshoots everyone. It’s such a liquid currency that it becomes a proxy for all the other emerging markets and for risk assets in general.”
South African government bonds fell the most since March, with yields on benchmark rand bonds due December 2026 climbing 27 basis points to 9.14 percent. African Eurobonds plunged, with yields on Nigeria’s dollar bond due in 2023 rising 26 basis points, the most on a closing basis since Feb. 8, to 7.34 percent. Ethiopia’s 2024 Eurobond yields climbed 21 basis points to 8.09 percent, the highest since June 1. Investors also sold Rwanda’s dollar debt due in 2023, the yields jumping 34 basis points to 7.66 percent, the highest since Feb. 25.
Kenya’s benchmark equity index fell 1.8 percent, heading for its biggest drop since Oct. 15. The East African country’s finance minister said the vote may slow inflows to Africa, while the central bank said it would intervene in the money and foreign-exchange markets to reduce volatility.
“The kind of volatility being witnessed is crazy,” Faith Atiti, a research analyst at Nairobi-based CBA Capital, said by phone. “Equities are coming down like crazy.”
The Johannesburg Stock Exchange All-Share Index fell 3.6 percent, led by Naspers Ltd., SABMiller Plc and BHP Billiton Plc. The Johannesburg Banks Index dropped 4.1 percent as shares of lenders including FirstRand Ltd. plunged. Gold shares surged 16 percent, the most since 2008. The MSCI Emerging-Markets stock index fell 3.2 percent.