On Wall Street, London and Hong Kong are extremely cautious and distrustful. There are no recommendations to “go in” blindly. What are the expectations in the local square.
It’s heads or tails, with no room for speculation. That is why, perhaps, for “the market” a big difference between a victory for Sergio Massa or Javier Milei, is that the minister is already clear about what he is going to inherit and the other would find out completely on December 10. How much will the blue dollar open at on Tuesday? Who knows, even if it were to rise abruptly it would no longer surprise anyone knowing what is coming, sooner or later. If anything reigns, it is confusion. “The market” has already covered everything it could. People dollarized to the extent they could and were allowed. The decision-making was under very high uncertainty and discomfort. Investors now just wait for the key winner’s speech tonight, and also the loser’s. They know that no one will get out of this situation alone.
On the outside the feeling is one of apathy. None of the runoff options were a priori on the menu of the “market” that before the PASO expected a victory for Together for Change, which promised pro-market reforms and had the political structure to carry them out. The post-PASO reality forced them to rearrange themselves in the face of the libertarian leader, promising reforms but without structure and a minister with assured governability but who did not guarantee the reforms. After the first round both improved, Milei with the support of the PRO and Massa showing more openness.
None showed a serious economic plan and that is why doubts persist and what they say after the runoff will be key. Hence on Wall Street, London and Hong Kong are extremely cautious and distrustful. There are no recommendations to “go in” blindly. They can only wait, until the panorama becomes clearer, very short term bets, that is, buy and leave quickly as soon as there is a rebound. The forecasts for the Argentine economy that come mainly from Wall Street and London point to a recessive 2024 and high inflation. In this sense, the latest IIF report on Argentine prospects is almost lapidary, expecting a prolonged recession (for 2024 they estimate a drop in GDP of 1.3% due to the implementation of a stabilization and adjustment plan). With its pluses and minuses, the external projections are not encouraging, but they do not speak of a final crisis, and they only consider the case of dollarization to be a leap into the void scenario.
There are also millions of questions about the official dollar of the day after and great consensus on a value close to between $600 and $650 both locally and externally. In this regard, it is worth remembering that days ago this newspaper commented that the main Brazilian banks were projecting a devaluation after the ballot with a floor of $500, and even $670. Now, analysts speculate that the Central Bank (BCRA) and the MECON may very well go on the side of taking it directly to those levels of more than $600, or depreciate it a little, say 10 or 12%, and that For example, exporters settle after an exchange split 50% in the official and the rest in the financial, which would approximately give a commercial dollar of $650.
A first issue is that there is no room for more devaluations without a plan behind them and, secondly, no less important, we cannot ignore the impressive stock of public securities adjustable to the official dollar (linked dollar) and the Duales that adjust by CER or by official dollar. According to the consulting firm 1816, the stock in circulation is around US$45,000 million in nominal terms. If official holdings are excluded, for example in the hands of the BCRA, the stock stands at just over US$20 billion. So this would be the biggest determinant of the next government’s exchange rate policy. It is enough to simply project the monetary impact of a devaluation in 2024. For example, a devaluation that doubled the official exchange rate would imply a monetary expansion of almost today’s Monetary Base.
From the point of view of the local market expectations, the behavior of local stocks since PASO seems to reflect a preference for libertarianism, especially on the side of non-banking papers. While for bank shares, bonds and the peso, the most encouraging scenario would be a winning Massa, burying any idea of dollarizing.
For now, it is worth noting that it is true that several hundred billion fixed-term deposits in pesos left between the PASO and the first round, but it is no less true that a few returned but the majority remained very liquid. at sight and in a savings account. Everyone guards the weapons.
Source: Ambito
