LONDON — Chile’s peso and stock market soared on Monday after Chileans rejected a proposed new constitution, a move widely expected by pollsters, as the government of the top copper-producing nation prepares to draft a likely more moderate text.
Chileans voted overwhelmingly on Sunday to reject what would have been one of the world’s most progressive charters, which would have marked a sharp shift from its market-friendly constitution dating back to the Augusto Pinochet dictatorship.
The country’s currency strengthened more than 4% against the dollar as local markets opened to touch 838.20, levels last seen on June 10, Refinitiv pricing data showed. Giving away some of its early gains, the currency last changed hands at 846.90.
Meanwhile, the local stock market rose more than 6% in early trading with strong increases in the shares of LATAM Airlines , retailer Cencosud and ferromining company CAP.
“The outcome may force a more moderate and gradual reform impulse,” said JPMorgan’s Diego Pereira in a note to clients, adding that he expected positive market momentum thanks to less uncertainty and lower risk premia ahead.
“We believe both real and financial investors would prefer that if the current constitution has to be reformed, it’s done by the Congress or a committee of notables.”
Shares of London-listed miner Antofagasta rose 3.4% on Monday, outpacing gains in the STOXX Basic Resources Index , which was up 1%.
Chile is home to global copper giants including Codelco, BHP , Anglo American and Glencore as well as Antofagasta.
Chile’s peso has fallen some 3% since the start of the year, making it an outlier in the Latin America region, where currencies from Brazil’s real, Peru’s sol to Mexico’s peso have chalked up solid gains in 2022.
The referendum was also seen as an evaluation of the government, which is struggling with buoyant inflation, an economic slowdown and an internal security crisis, according to experts.
Chile’s central bank is expected to raise the benchmark interest rate again this week in the face of persistent inflationary pressures.
After acknowledging defeat, President Gabriel Boric pledged to make adjustments in his government team and work with Congress to draft a new text. Center-left and right wing parties have also agreed to negotiate.
(Reporting by Karin Strohecker in London Writing by Valentine Hilaire; Editing by Andrea Ricci and Matthew Lewis)