Rand, South African Assets Rally on Fading Prospects for Brexit

  • Currency, bonds and stocks advance to multi-week highs
  • Campaign for U.K. to stay in EU gaining momentum in polls

South African markets rallied as diminished risks that British voters will favor an exit from the European Union in the June 23 referendum prompted investors to buy developing-nation assets.

The rand headed for its biggest gain in more than two weeks as government bonds advanced for a fourth day and stocks in Johannesburg for a third. The currency strengthened 2.2 percent, the most since June 3 on a closing basis, to 14.8162 per dollar, leading gains in emerging markets. Yields on benchmark rand-denominated bonds due December 2026 fell 7 basis points to 8.99 percent, set for the lowest since April 29. The benchmark FTSE/JSE Africa All Share Index rose 1.7 percent, poised for its highest close since June 10.

“Polls are now again hinting at the ‘remain’ camp finding majority support, after the contrary was seen early last week, and that had sent ripples across financial markets,” Jana Van Deventer, an economist at ETM Analytics, said by phone from Johannesburg.

A survey for the Mail on Sunday newspaper showed 45 percent of voters backing the “remain” camp, with 42 percent in favor of a so-called Brexit -- a turnaround from early last week when a slew of surveys put the latter group ahead. Officials from central banks and governments around the world have signaled concern that a U.K. withdrawal from the 28-nation bloc could unleash turmoil across global markets.

“It’s worth pointing out what we would see in the markets in the event of them voting to stay -- we’re likely to find that risk assets find even more support; the rand could rally quite significantly, as well as local bonds,” Van Deventer said. “We do have quite close trade ties with Britain and if their economy takes a knock because of a Brexit, that would filter through to South Africa. From a trade perspective, economic-growth perspective, that could have a negative impact.”

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