“We are still waiting for clear signs of macro normalization, caution should prevail in terms of investment“. The phrase, included in a report of the SBS Groupreflects what is happening in the markets.
This Friday’s rally was more like opportunity purchases against assets that had lost a lot of ground, that at a turn in the negative trend which the week showed, where bonds suffered strong declines, and the country risk approached the area of 1,600 points.
What are the reasons behind the caution in the market?
Stock market agents agree that there are multiple reasons to be opportune. Among those they mention, they include that The IMF has not yet disbursed the almost US$900 million planned, that the agreement to renew the swap with China is in we’ll see and that the Government has more obstacles than expected to advance the laws promoted by Javier Milei.
“He Congress Not only is it an obstacle, but now the opposition has gone on the offensive, and is promoting a change in the mobility law that represents a shot at the waterline of the economic program,” summarizes a stockbroker who this week lived the jumps amid the fall of bonds and the decline of ADRs in New York.
Can that caution mutate into confidence? Difficult, the consulted operators agree. The reason: the surveys continue to give Milei room for maneuver, but they do not influence the key fundamentals, which are given by the Congress of the Nationny its increasingly oppositional tendency to libertarian policies.
Wednesday could be “D-Day”
Analysts agree that Wednesday, when the Senate debates the Bases Law, may be “D-Day” for the rebound in bonds and stocks
In this scenario of weakness, analysts agree that “D-Day” will be determined by what happens next Wednesdaywhen the Senate will discuss the Law Bases and the tax package.
The degree of reforms introduced will be directly proportional to the instability of a market who feels more comfortable with Milei chainsaw that with the wasteful hand of those who governed the last four years.
And that, as long as the laws end up being approved, which until now is not clear.
“If from the changes it emerges that resents the fiscal adjustmentit will be a negative signal for investorsbecause it will indicate that the Milei plan is entering an area of greater turbulence,” explained an analyst who fatigues the halls of the Buenos Aires Stock Exchange.
Analysts believe that The Government needs the approval of the Bases Lawan agreement with China for the swapand that IMF Board release the funds, so that sovereign securities rebound.
But, even so, the picture is not completely clear. What will happen when Milei sends the next project to try to keep spending at bay? ask those who recommend investment decisions on a daily basis.
That volatility represents a nightmare for funds that always have Argentina in their chapel, due to its status as a serial defaulter.
The delay in IMF disbursements is another of the factors that affect the market
The legislative weakness of the Governmentwith serious difficulties in achieving the approval of the Bases Law in the Senate, sets the rhythm of the markets.
Another analyst consulted mentioned the delay in the approval of the Bases Law, the rumors about the swap with China and the delay in the IMF disbursement as the key reasons for this moment of uncertainty in business.
We will have to wait until next Thursday.after the treatment in the Senate on Wednesday, to find out how this film continues.
Other factors that affect the market mood
They are not the only concerns. Other analysts add the delay in the purchase of reserves by the BCRA as another of the factors that play against the spirit of the markets.
In the business sector, the oven is not for buns either. Both the UIA as the Chamber of Commerce They spoke out in favor of the Bases law. The Institute for Business Development of Argentina (IDEA) also joined in, which also questioned the retirement mobility reform approved by Deputies.
According to the IDEA directive, “these patches They do not protect our retirees, but they only push the problem forward.“.
And he focused on a key issue, widely debated in the world of money: “In Argentina It is irresponsible to propose increases in spending who do not have the genuine income to face them,” IDEA said.
The entity came out to provide support to Milei, pointing out that “society voted for a clear change of course and it is the responsibility of Congress and the Executive Branch to articulate measures to resolve Argentina’s emergencies.”
But he also seemed to make a claim to the Executive Branch, claiming: “Work together!”. It is an issue that different businessmen have been demanding for a long time. The need for more dialogue to advance central issues that end up becoming state policies.
Milei seemed to try something along those lines when she proposed the May Pactsbut according to the reading of some business sectors, it was wrong by not calling more clearly to debate some of the guidelines that he sought to impose.
“It was a closed package. I think the governors they would have joined with more enthusiasm if they were allowed to include some ideas. For now it was a missed opportunity,” said a senior manager of an oil company who participated in Milei’s last lunch with the Cicyp council.
The Argentina know a long timemissed opportunities“Perhaps that explains the reluctance of investors to bring their dollars to these pampas.
