The closing of the first half of 2024, which left a positive balance regarding the prices reached by stocks and bonds, although the performance of recent weeks warrants a more detailed reading, since the assets They cut positions and were far from the maximums of the year.
In a short week due to three local holidays, analysts gave their opinion on the future of Argentine stock and bond prices, after recent political achievements and positive economic data from the government of the ultra-liberal president. Javier Milei.
To list the main ones, last week, the Senate approved with modifications the reform package promoted by the ruling party which must be endorsed by Deputies, while the data of May inflation, at 4.2% and below analyst estimates, confirmed the trend of deceleration in price increases in the first part of the year. On the other hand, a swap of currencies for the equivalent of USD 5,000 million with China and the International Monetary Fund (IMF) approved a review of goals enabling a disbursement of 800 million dollars. Other data such as fiscal and trade surpluses are also weighted in the financial world.
“The trifecta of the week – China, Bases Law in the Senate, inflation data for May at 4.2% – decompressed the profit taking that had been enhanced since the accelerated disarmament of the remunerated liabilities of the Central Bank against Lecap del Tesoro three weeks ago,” reported the consultant EcoGo.
Converted to numbers, the index S&P Merval of the Buenos Aires Stock Exchange holds a average profit in dollars of 28%according to the “cash with settlement” parity implicit in ADR prices on Wall Street.
This Thursday, the leading panel of the Buenos Aires Stock Exchange reaches 1,576,462 points in pesos and 1,220 points measured in dollars. From the intraday nominal record of 1,665,774 points in pesos on June 3, the Merval index lost 5.4%, while in dollars it fell 9.9% from the recent high of 1,354 points on May 30.
In June Argentine ADRs on Wall Street exhibit drops of up to 20%as in the case of Telecom and IRSAfollowed by Cresud (-19%) and the banking sector (in a range of 8% to 16%).
In the case of the Sovereign bonds, the reversal began at the end of April. Global and Bonares titles in dollars had price increases of more than 100 percent since the beginning of the year. In the last two months the price adjustment averaged 18% from its April 22 highsMeanwhile he risk country It rose from a floor of 1,143 basis points to almost 1,400 basis points.
What is the interpretation of the “macro” data that stock market agents have been making and what was explained by the recent sell offor massive sale?
The expectation for the legislative advance of these regulations that President Milei considers central to his administration, a series of modifications were made with great delay. Although it was a political success for the president, there was a natural sale once the news was confirmed, to the waiting for something new drivers that allows the upward trend for assets to recover. “In a shortened week, the focus will be on Congress when the debate is held on the modifications made by the Senate to the Base Law,” they stressed from Balanz Capital.
“ADRs and dollar bonds during the local holiday fail to match the better tone of the north, and so they are more cautious while operators remain attentive to the new political and economic stage that could open after the Bases Law and fiscal package. This is even when a simple majority approval of those fiscal chapters that returned to Deputies, important to consolidate the sustainability and profile of public accounts, is discounted,” explained the economist. Gustavo Berowner of Estudio Ber.
Starting in December, the Government managed to consolidate a path of reducing inflation month by month, from a peak of 25.5% in December to 4.2% in May. In the second half of the year, it is estimated that this disinflation will moderate and may become erratic in the event of exchange rate adjustments and updates in regulated rates and services.
Regarding economic activity, a floor for recession is foreseen in the middle of the year, although a significant rebound in the short term is ruled out. In this sense, listed companies support their increases based on results that depend on the economic cycle.
An IMF report indicated on Monday that high-frequency indicators suggest that the country’s activity would be stabilizing and real wages would hit a floor after five consecutive years of loss.
“Looks are directed at possible future adjustments in the monetary and exchange scheme towards a new program with the IMF that can provide fresh funds that contribute to moving towards a exit from the stocks, which would become a key drivers for investors,” added Gustavo Ber.
“The announcement of the reduction of the PAIS tax not compensated with an increase in the A3500 (official exchange rate of the BCRA) is a new bet on less short-term inflation at the cost of higher inflation in the future – when when the stocks are released it will possibly be “A bigger leap is necessary to unify the dollar,” the Consultant 1816.
The monetary entity has purchased more than USD 17,000 million in the exchange market since Milei arrived at the Government. Although June is already the seventh consecutive month with a net purchasing balance, the result looks meager 25 million dollars. On the other hand, international reserves, today close to USD 30,000 million, did not grow in the same proportion, as they increased by just over USD 8,000 million, half of the purchasing balance. And in turn, the net balance – discounting private loans and deposits – remains around zero.
After the bullish push that the advancement of the Bases Law provoked, expectations now focus on a new program with the IMF and the lifting of the stocks
Given that the second half of the year usually places the BCRA on the selling side of the market, based on the seasonality of foreign trade, investors observe a weakness in terms of the public sector’s holdings of foreign currency to face debt payments, as well as of the “firepower” of the BCRA to stabilize the price of the dollar in the event of an elimination of exchange controls. This “dollar factor” affects the price of bonds and, indirectly, banking stocks, since entities have a lot of sovereign debt in their portfolio.
“The prospects are that the Government must adapt its plans and if a similar reaction does not occur, the situation could become very challenging,” he estimated in a report. VatNet Financial Research. ”Times are getting shorter, which is why we estimate that there would finally be some benefit for exporters based on higher income and/or lower expenses, given that at the moment there are not many alternatives in sight,” he added.
“We see value in dollarizing portfolios at this level of real exchange rate for conservative profiles. Moderate profiles can bet on a mix between CER debt tranche 2026, MEP dollar, and GD35 and GD41 bonds. Riskier profiles could see value in the equity of the energy sector and a mix of dollar bonds from the Globales curve –GD30, GD35 and GD41–”, he specified. Juan Manuel FrancoChief Economist of the SBS Group.
“In this context and if one considers the levels of the sovereign curve at the beginning of May as a target, there is still room and we continue to like the GD35 as a bond to increase the sensitivity of the portfolio,” he added. Pedro Siaba SerrateHead of Research & Strategy at Portfolio Personal Inversiones.
The Argentine markets will remain closed until Monday the 24th, in the middle of an “ultra short” week for financial activity, with the breaks on Monday for the commemoration of the “Step to the Immortality of General Martín Miguel de Güemes”, while this Thursday “Flag Day” was celebrated and on Friday a ‘bridge’ holiday was arranged for tourist purposes.
