Improves the global climate for emerging markets

Improves the global climate for emerging markets
November 20, 2023 – 00:00

The region’s currencies strengthen after October’s inflation data in the US. The external context becomes more favorable for Argentina, however, investors demand structural reforms to refinance the country.


Global markets celebrated after the news became known. October inflation in the United Stateswhich was considerably lower than that of September and the expectations. This data, added to the employment data released at the beginning of the month, confirms the “soft landing” that investors expect for the economy in 2024 and they support the expectation that the Fed will not raise rates in December. In this framework, a positive outlook emerged for emerging markets, which have operated in the green in recent days in line with the main indexes. Wall Street. Analysts consulted by Ambit They highlight that the international context is becoming favorable for Argentina, although they warn that investors will demand structural reforms to regain confidence in local debt and assets.

inflation in The US fell to 3.2% year-on-year in Octoberslightly below the 3.3% estimated by the market and the 3.7% from September. The data was celebrated by the market with increases in the main Wall Street indices. Among them, increases stood out in the S&P 500 of 2.34% in the last five days, as well as in the Nasdaq 2.5% and in the Dow Jones 2%. Unlike the previous semester, a return to market risk was evident. In this line, the index Russell 2,000which follows small-cap companies, rose 5.83% in the last five sessions.

In this framework, market bonds emerging markets rose 1.82% in the last five days and 4.31% since November began. Likewise, the actions of emerging markets rose 2.67% and 3.5% respectively. As for Argentina, the dynamics of stocks and bonds in dollars were conditioned by the complex local situation and electoral uncertainty. Thus, dollar bonds accumulated a slight positive movement of 2.3% since November began, while stocks had steeper rises.

Juan Alraportfolio manager at Southern Trust, highlighted: “The inflation data in the US came out more positive for the market than we could expect. There was a slowdown that could imply that today’s rate is already at its ‘higher for longer’ levels and that The Fed’s policy would be having its effects. This is positive for emerging markets since it would indicate that the rate would sooner or later begin to decline and investments in the riskiest countries would be a great opportunity. This gives you a world stage much better than Argentina, if inflation worldwide drops and import prices too. At the moment there were no significant levels of flow to emerging markets, as the rate remains at high levels that do not generate sufficient levels of attractiveness for emerging markets”.

In this line, Gustavo Basaldúa, Financial Consultant at Quaestus Advisorypointed out “if the trend of reducing inflation is confirmed in the coming months, the probability of reducing the rate of Fed Funds at a higher speed in 2024 and 2025 acceleratesand this would imply a good opportunity for emerging sovereign and corporate fixed income average credit quality BBB, BBB-, and medium and long duration that today have returns very attractive close to 7 or 8%”. “Also combined with investment grade fixed income or American treasury bonds. For conservative investors it is an opportunity to set high rate for several years”he added. Regarding variable income, Basaldúa pointed out that it is not so clearwill depend on the evolution of American stocks and the possibility of mild or not so mild recession of the American economy.

On the other hand, regarding the positive movement of emerging currencies, the appreciation of the Brazilian real It plays in favor of Argentina, which accumulates a strong exchange rate delay. The money of Brazil remained strong despite the rise of the global dollar. After the data of US inflation., the dollar index that compares it with a basket of currencies fell 2% to 103.65 points. In this framework, the Brazilian real 2% appreciated in the last five wheels and 4.33% in the last month. It is important to clarify that after the devaluation on August 14, the real multilateral exchange rate had touched 116 points. However, this competitiveness was quickly eroded by the fixation of the exchange rate and the strong inflationary acceleration, which led to the TCRM at 85 pointsminimums in the current management.

Source: Ambito

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