The Colombian benchmark IGBC stock index Thursday tumbled to close at its lowest level since November 30 as investors worry about the May presidential elections and as world markets plummeted.
The IGBC index fell 1.5% to 11333.99 points, its lowest level since Nov. 30, when the index ended at 11245.01 points.
Some investors sold on concerns about what may happen during the elections due in May, after the local press reported that one of the nine judges of the country’s Constitutional Court opposed the holding of a referendum to allow President Alvaro Uribe to run for a third term.
“Markets hate uncertainty,” said Daniel Munoz, a market analyst with local brokerage Profesionales de Bolsa.
Uribe supporters gathered signatures asking for a constitutional change, then the Colombian Congress approved a bill to hold a referendum, which still needs the approval of a majority of the nine judges of the Constitutional Court. Polls suggest Uribe would win a referendum and the subsequent presidential elections.
Under Uribe’s tenure, violence has fallen sharply, while business and consumer confidence have risen. Direct and portfolio investment flows have followed suit, leading to robust economic growth in recent years, excepting 2009 as a result of the global financial crisis.
After the press reports, Uribe said he will abide by the court’s ruling.
Andres Jimenez, a market analyst with local brokerage Interbolsa, said people shouldn’t be concerned as it is very unlikely the government policies will change after the elections, and that Uribe is strong enough to endorse a candidate and have that candidate elected in his stead.
Politics weren’t the only factor to hit the stock market on Thursday. “The market responded to the declines all around,” Munoz said.
The market lost ground in Colombia following a 200-point decline of the Dow Jones Industrial Average. In Madrid the IBEX-35 index fell 5.9%.
Local shares of oil company Pacific Rubiales Energy (PRE.T) fell 2.8% to 26,900 Colombian pesos ($13.52), while shares of holding company Inversiones Argos SA (ARGOS.BO) fell 3.2% to COP18,980.
On the currency and the bond markets, investors also sold on Thursday, for the same reasons, Interbolsa’s Jimenez said.
The Colombian peso weakened to COP1,989.8 to the dollar from COP1,967.9.
The yield on the Colombian benchmark peso-denominated bond rose to 9.018% from 8.945%.
(Inti Landauro, Dow Jones)