Anglo leads way down as JSE shudders amid Brexit vote

SHARES in Anglo American shed nearly 13% in the first hour of trade on the Johannesburg Stock Exchange as markets absorbed the surprising news that Britain had voted to exit the European Union (EU).

Other diversified mining firms, the fortunes of which are correlated to world economic growth patterns, were also heavily sold down with BHP Billiton losing 8% whilst Glencore, the Swiss-based miner and trader, was 10.9% lower.

“Risk assets traded down hard on the back of the UK’s Leave vote in the referendum,” said Goldman Sachs in a morning note. The price of copper was 3% lower.

However, the gold price rose on the back of safe haven buying. “Expect gold and related equities to perform well as haven demand rises (gold up 4.6%),” said Goldman Sachs.

AngloGold Ashanti was 19% higher at the time of writing whilst Gold Fields was up 18%. There were rises in the shares of DRDGold, Harmony Gold and Sibanye Gold which were 14.5%, 18% and 13.6% higher respectively.

Bullion had rallied the most since 2008, according to Bloomberg News in an article filed at midnight as the results of the British referendum pointed towards a vote for leaving the EU.

“The volume we saw last night was unmatched by anything, and we’re nowhere near done,” Naeem Aslam, chief market analyst at London brokerage TF Global Markets told the newswire service. “The phone’s been off the hook all night. We were around the news wires nonstop.”

Gold was last trading at $1,319.70 per ounce – an increase of nearly 5% – and taking the rand gold price to R636,014 per kilogram assisted by a 5.45% decline in the rand against the dollar.

Commenting on the potential commercial impact of the Brexit vote, Anglo American said: “We, of course, respect the outcome of the vote but believe it is too early to comment on the implications of this decision.

“Anglo American does not do much physical UK-EU trade, so the implications are unlikely to have much direct commercial impact on us. However, like many businesses, the sooner there is certainty and stability, the better.”

Raymond Parsons, an economist at the NWU School of Business & Governance, said the vote today could signal commercial changes with its trading partners that would have to be added to South Africa’s policy agenda.

“As there is no precedent so far for an economy to exit the EU, the Brexit decision takes the global economy in general, and the South African economy in particular, into prolonged uncharted waters. It becomes a complicating factor in South Africa’s economic outlook at present,” he said.

“In order to progressively recalibrate South Africa’s trading relations and explore new options in the light of Brexit, government, labour and business will now need to add the possible implications of Brexit to the national policy agenda.”