After the approval of the Bases law and the fiscal package the day before, equities and fixed income ended with widespread losses. Although in the pre-market the first numbers seemed to show a green day, after the opening everything turned around, to finally close with marked falls.
In this context, the NYSE-listed securities were marked by declines led by Central Puerto (-4%), Grupo Financiero Galicia (-3.4%); and Telecom Argentina (-2.9%). At a local level, the Buenos Aires stock exchange lost 1.5%.
As for fixed income, the sovereign dollar bonds under New York legislation, recorded widespread declines led by the Global 35 (-2.6%); the Global 30 (-2%); and the Global 46 (-1.9%).
“With the Basic Law approved, the exchange rate should converge to more stable values, giving the Government some peace of mind in the short term. This should be accompanied by an increase in the recovery of reserves, which slowed down in July,” he said. Gustavo Neffa, economist and analyst at Research for Traders (RfT) at iProfesional.
The fact is that the agricultural sector is liquidating foreign currency from exports, but the next few months will be of less net accumulation due to the commitments of dollars to be paid. “Likewise, this will occur in a context of greater optimism because the Government is going to have its first laws approved and certain legitimacy and political consensus”Neffa said.
What the City warns about
According to the financial analyst at Epyca Consulting, Eric Paniguaapproval “is always good news” for international investors. However, he pointed out that much of the euphoria that bonds and stocks have had in recent weeks or months had already been discounted after the approval of this law.
“This confirmation in Congress should be a reaffirmation of the good moment of Argentine assets. But I do not believe and we are not seeing in the round an extraordinary exacerbated increase in these values. In the medium term and looking at it with a slightly longer view, If none of the changes proposed by the law actually materialize in the real economy, it is difficult for assets to remain firm. and at the same time that interest in Argentina’s recovery at a global level is maintained,” the economist estimated.
Financiers wonder how the Government will ensure the competitiveness of the economy without exchange rate delays
In turn and in the same vein, from Personal Investment Portfolio They indicated that the positive result was already in prices, so these movements “are logical.” In this sense, they pointed out that Global titles could show stronger returns as the days go by, since this outcome improves the short/medium term perspective.
“In fact, when comparing with the prices of sovereign bonds at the beginning of May, when there was still no certainty about the approval of these laws, we see that there is still a considerable distance left in the middle/long section of the curve,” they stated.
Investor Alert: What are the warnings following the approval of the Bases Law?
For now, in the midst of the thick harvest and with the Central Bank selling foreign currency instead of buying itwhat happened was that more pessimism appeared among large investors.
In the last few hours, Wall Street banks and investment funds have been lowering Argentina’s rating.
The investment bank Jefferies, one of the benchmarks of Wall Street, became skeptical on the progress of the Argentine economy. He went from being optimistic to “neutral”, which in practice works as a recommendation to his clients to sell Argentine debt bonds until further notice.
Jefferies joins other banks and investment funds that have distanced themselves from Argentina in recent weeks and are now suggesting selling debt bonds.
Wall Street investors distrust Argentina’s economic plan
The key is what is happening with the Central Bank reserves and the incipient exchange rate lag.
In fact, the Central Bank has been buying foreign currency for almost the same number of days this month as it has been selling it, which is unusual. In the middle of the harvest season, the BCRA should be buying no less than US$150 to US$200 million each day.
What’s happening in the world markets
The main Wall Street indices ended with a negative trend, after the latest reading of the basic Personal Consumption Expenditure index (an indicator closely followed by the Fed) and while investors weighed the consequences of the Biden-Trump debate.
The last significant piece of data for the first six months of the year came in the form of the Federal Reserve’s preferred inflation gauge. The core Personal Consumption Expenditure (PCE) index, which excludes the cost of food and energy and is closely followed by the Federal Reserve, rose 0.1% in May compared to the previous month, in line with the Wall Street expectations.
Market sources said that despite another positive sign that inflation is easing after being higher than expected in the first quarter, the central bank is “not likely” to cut rates at its next meeting in late July.
Analysts noted that the Fed likely “needs more time” and evidence that inflation is moving sustainably toward its 2% target, making a first cut more likely later this year.
On the political front, with the US election in November at the top of the risk list, investors took note of President Joe Biden’s weak performance in his first debate against presumptive Republican nominee Donald Trump. Tax cuts and drastic trade measures promised by the former president are seen as boosting stocks.
Wall Street
Wall Street’s major indices posted negative results. The S&P 500 lost 0.41%, the Dow Jones industrial index fell 0.12% and the Nasdaq technology index fell 0.71%.
Merval
The Merval recorded a fall of 1.5%. In this context, the leading stocks fell by Central Puerto (-3.4%); Grupo Financiero Galicia (-2.9%); and YPF (-2.4%).
ADRs
The papers listed on the NYSE marked decreases led by Central Puerto (-4%), Grupo Financiero Galicia (-3.4%); and Telecom Argentina (-2.9%). At the local level, the Buenos Aires stock market lost 1.5%.
Bonuses
In terms of fixed income, sovereign bonds in dollars under New York legislation registered general declines, led by the Global 35 (-2.6%); the Global 30 (-2%); and the Global 46 (-1.9%).
Risk country
Country risk is around 1,456 basis points.
