(Adjusts title and updates market data at close)
BUENOS AIRES, June 27 (Reuters) – Argentina’s financial market showed mixed luck on Thursday with speculative positions awaiting a favorable vote for the Government on two bills with which the ultra-liberal president Javier Milei intends to attract investments and direct the country’s battered economy.
The Lower House, which had already approved the “Bases Law” and a tax reform project at the end of April, must ratify its approval after modifications made by the Senate two weeks ago.
“Although (the official proposal) has suffered significant pruning taking into account the original project, the government would succeed in approving a framework that allows it to implement the measures it considers necessary to rebuild the Argentine economy,” said Wise Capital.
In this context, the leading stock index S&P Merval improved a firm 3.89% as a provisional close with encouragement from Argentine ADRs on Wall Street, after rising a selective 0.24% in the previous session. This stock market benchmark has accumulated an increase of close to 70% so far this year.
“The performance of Argentine stocks since the end of last year has been very positive in light of the change in administration. The valuations of Argentine companies remain at attractive levels today, given that they started from extremely depressed levels,” said Capital Markets Argentina.
“Although we expect high volatility in the Argentine market in the short and medium term, we consider that the potential improvement in long-term economic conditions presents an interesting opportunity to invest in Argentine assets,” he added.
Over-the-counter sovereign bonds reversed their intraday trend and averaged a 0.4% decline, with country risk, as measured by JP Morgan, rising to 1,445 units at 2000 GMT.
“Global bonds are in a ‘stand by’ state, while the interest payment date approaches on July 9,” Delphos Investment recalled, noting that “the disbursement represents 2.8 billion dollars, of which 1.5 billion correspond to interest payments and the remainder to the amortization of bonds maturing in 2030.”
In the exchange market, the peso continued with liquidity regulated by the central bank (BCRA) and a “crawling peg” of 2% monthly at balanced levels compared to the day before at 911.5 units per dollar.
Greater needs for genuine foreign currency from the market forced the BCRA to sell 85 million dollars from its coffers, moving into negative territory by some 46 million in its June balance, compared to the 2.522 billion dollars acquired in May.
“There are people with good intentions thinking that the ‘blend’ (dollar) (intended for exporters) should be removed, others also think that it should be devalued and others compensate with a reduction in the PAÍS (tax) (for purchases of foreign currency),” said economist Gabriel Caamaño
“It is difficult to accumulate reserves with stocks (exchange control),” he stated, and estimated that “we must find a way to deal with these issues in the most consistent way and begin to mark with concrete decisions the path out of the stocks, to decompress uncertainty”.
The agro-export sector is governed by an export settlement scheme under the ‘dollar blend’ modality, through which they can settle 80% of their foreign currency at the official dollar price and 20% at the stock market value ‘contado con liquidación’ (CCL).
The exchange rate in the alternative segments, given the strict controls in force, was set at 1,352.2 pesos per dollar on the ‘CCL’ exchange and at 1,331.3 units in the so-called MEP dollar.
In a reduced business context, the peso in the marginal or “blue” segment rose to 1,355 per dollar, after reaching a historical minimum level of 1,380 selling units in the previous session.
“In Argentina, maximizing the profitability of pesos has become a crucial practice. However, when it comes to dollars, the most common tendency among people is to choose to keep them under the mattress or in a bank savings account, where the return is 0% annually,” commented Diego Pizzulli of IOL. (Reporting by Walter Bianchi; collaboration with Hernán Nessi; Edited by Jorge Otaola)
Reuters
