(Bloomberg) -- Colombia's peso fell the most in three weeks while stocks and bonds slid after the government unexpectedly failed to gain popular support for a peace deal that helped support a rally last quarter.
The currency weakened 1.9 percent to 2,939.15 per dollar at 8:59 a.m. in Bogota after citizens narrowly rejected a peace agreement between Colombia and Marxist guerrillas by 50.2 percent to 49.8 percent in a weekend ballot. The biggest Colombia stock ETF traded in the U.S. lost the most in almost a month, while the yield on local-currency bonds due in 2024 rose the most since July.
The nation's assets became a favorite of foreign investors this year as oil prices rallied and speculation grew that the long-awaited peace agreement would end five decades of fighting, helping clear the way for President Juan Manuel Santos to focus on pushing through a tax increase and boost revenue that's suffered from a commodity-price slump. The peso rose 1.4 percent in the third quarter, beating all of its peers in Latin America and bringing the 2016 appreciation to 10 percent.
“There's money that has been positioned in Colombia in expectation of a referendum win followed by a tax reform," Jan Dehn, the head of research at London-based Ashmore Group Plc, said by phone from London. "That money was clearly on the wrong side of the trade and may have to come out," said Dehn, who will look for an opportunity to buy peso assets if the currency "cheapens a lot" from here.
Colombian international bonds also fell Monday, with the yield on the $1.5 billion of debt due in January 2026 jumping the most since the securities were issued a year ago, climbing 0.21 percentage point to 3.41 percent. The yield on local bonds due in 2024 rose 0.11 percentage point to 6.95 percent.
The Global X MSCI Colombia 20 ETF fell 3.6 percent to $9.15 as Bancolombia SA, the country's biggest bank, slumped 3.2 percent and cement maker Cemex Latam Holdings SA dropped as much as 4 percent to a seven-month low.
The referendum would have guaranteed The Revolutionary Armed Forces of Colombia 10 seats in Congress from 2018 to 2026, and at least three polls published last week predicted it would pass by 60 percent or more. Without the FARC scaring away investors and without the war diverting government spending from more productive uses, Colombia's economy could grow 1 percentage point per year faster, according to the Finance Ministry.
--With assistance from Ben Bartenstein and Sebastian Boyd
To contact the reporter on this story:
Natasha Doff in London at ndoff@bloomberg.net
To contact the editors responsible for this story:
Daliah Merzaban at dmerzaban@bloomberg.net
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