Old Mutual hit as South African exposure punished

Old Mutual was the sharpest faller on the FTSE 100 on Friday as the insurer led declines in UK-listed stocks with exposure to South Africa following the dismissal of the country’s finance minister.

The insurance company, which does most of its business in the African nation, at one point fell as much 8 per cent on the day before closing down 7.5 per cent at 200.6p.

The fear that South African president Jacob Zuma would fire his finance minister Pravin Gordhan had hung over markets all week with shares hit hardest on Friday following the latter’s exit late on Thursday.

The departure of the reformist finance minister intensified fears that South Africa could lose its investment grade rating.

“Emerging markets in general tend to be viewed towards the higher end of the risk spectrum, not least of which is due to the political volatility they can provide, as evidenced by the news from South Africa,” says Richard Hunter, head of research at Wilson King, an investment company.

London-listed miners with South African operations were also notable fallers. Anglo American fell 3.4 per cent to £12.20 and Rio Tinto slid 2.4 per cent at £32.10.

Mediclinic, an international private hospital group with operations in South Africa, was 6.2 per cent weaker at 712p while Mondi, a packaging and paper group with headquarters in Johannesburg, fell 2.5 per cent to £19.27.

“Such volatility is likely to persist until such time as the market becomes comfortable with both the country’s economic strategy as well as its trajectory,” said Mr Hunter.

The FTSE 100 closed down 0.6 per cent at 7,322.92 on Friday. For the week, the index of blue-chip companies was little changed and is up almost 2 per cent for the year.

Meanwhile the FTSE 250, the home to mid-cap companies more closely tied to the UK economy, finished Friday little changed at 18,971.8, 0.2 per cent lower. It has gained 3.6 per cent so far this year.

Motor and household insurer Direct Line was the top performer on the FTSE 100 for the majority of Friday’s trading session. It closed at 1.9 per cent higher at 347.4p thanks to upbeat broker commentary on the stock.

JPMorgan Cazenove raised its recommendation on Direct Line shares to “overweight” from “neutral”, while HSBC helped the positive sentiment by lifting its rating from “hold” to “buy”.

British Land, the UK property developer, was up 2.9 per cent to 610p after the company announced that it had been given the green light for the regeneration of Kingston town centre’s Eden Walk shopping centre in West London.