The Argentine market closed a good week, with positive numbers in bonds and Actions. A true rally, as they say in the jargon of the market. The dollarFor its part, it remained practically unchanged and brought calm to the Government. 15 days from PASO, the market is optimistic and various internal and external factors underpinned the increases.
While the Government and the opposition argue about who took on the most debt, the bonds closed the week in positive territory, with hikes of between 3.6% and 4.6%. The largest increases occurred in Global bonds in 2030 and 2035. Consequently, the risk country cut 69 units in the week (-4.32%) and closed at 1530 points.
The actions, meanwhile, jumped in Buenos Aires and New York. At the local level, the leading indicator of the Buenos Aires market, the S&P Merval, gained 7.93% in pesos and 8.54% measured in dollars counted with settlement, according to SBS group calculations. The best performance of the week was for the roles of Edenor, which rose 34.3%. Transener (22.7%), BBVA (21%), Banco Macro (19.3%) and Transportadora de Gas del Norte (17.9%) also had important increases.
On New York, meanwhile, Argentine papers also showed a majority of green numbers. Again, Edenor took first place on the adr’s podium, with a weekly increase of 39.8%. Four followed banks that presented good balance sheets in recent days: Macro (20.9%), BBVA (20.3%), Galicia (19.7%) and Supervielle (16.2%).
Analysts point to different reasons to explain the escalation of Argentine assets a few days before the elections. Here is a review of the main fundamentals that, according to the operators, explain the rally.
Polls and the return of the electoral trade
After the scandal generated by the photos of the party in Olivos, polls that were not very favorable to the government were published at the beginning of the week. “Just two weeks before PASO, the political game gained prominence with several polls to be analyzed. The latest results reflected the growing negative image of the Government after the ‘Olivos Gate’, which could have some impact on voting intention. In this framework, the scenario seems to be more even in the Province of Buenos Aires, thus leaving a more favorable situation for the opposition at the national level, ”said Portfolio Personal Inversiones (PPI).
The firm added that the bonds were viewed positively by the closing of the debt restructuring in the provinces of Buenos Aires and La Rioja. The question that operators ask themselves is whether the “trade electoral”, a strategy that is based on the financial experience of 2013, when the ruling party lost midterm elections and the market went up.
For Consultatio, there is no solid foundation to speak of an “electoral trade”, since so far this year it is the third time that the S&P Merval has experienced a streak that makes it rise 15% in dollars. “Although this time it took it to its highest level in 2021, it is also comparable to what it had 12 months ago when the debt restructuring process was completed,” said the firm, which considered that the 2013 scenario has little chance of repeating itself.
“What we are seeing today is that the market is ‘trading’ polls, not an electoral result,” interpreted Consultatio. And he added that this dynamic was already seen in 2015 and 2019. “The market relies on surveys not because they are effective, but because it is the only guide it has,” he added. In the last election, polls grossly erred and the market experienced a true “black Monday” after the legislative primaries.
The agreement with the IMF, on the horizon
Rumors of a quick agreement with the IMF also marked the week, later denied by Alberto Fernández himself. “Due to the complexity of the agreement and the level of consensus that it requires from the entire political arc, it is very unlikely that it will be able to achieve quick results,” they considered from Consultatio.
“With no black swans until the election, the tone of the market should remain positive in line with the polls. Counting the votes, and assuming a result that is not categorical for anyone, the Merval should adjust to a new level and lateralize for some time, while the agreement with the IMF steadily begins to gain prominence as the fundamental driver of the market ”, anticipated Consultatio.
The Fed and Brazil also play
Although Argentina is experiencing an electoral process with particular financial conditions, international factors also play a role. In particular, what happens with Brazil, whose assets showed a good performance in the week.
At the same time, good news came from USA. In a traditional conference held in Jackson Hole, the chairman of the Federal Reserve, Jerome Powell, took a cautious path and hinted that the stimulus program to prop up the economy has no end date yet. With low rates and more dollars in the world, the assets of countries like Argentina – which pay high returns – attract capital.