It should be noted that Colombian markets were closed on Monday for a national religious holiday. In the stock market, the MSCI COLCAP stock index ended this day with a drop of 3.8% to 1,398.42 points, although in the course of the day it managed to fall more than 5%.
According to analysts, the market is attentive “to the appointments made by Petro in its team of ministers.” The president-elect mentioned in the campaign the names of some economists considered moderate, including former ministers and a former central banker, as possible candidates for finance minister.
“The president-elect’s recent comments pointed to Moderate and orthodox macro policy options for the key post of finance minister. Still, if such a scenario were to materialize, we would not expect it to dispel uncertainties about the management of Colombia’s public finances and external balance,” Morgan Stanley said in a note on Tuesday.
Petro, a former guerrilla fighter, former mayor and current senator, became the the first leftist to win the presidency of Colombiawith ambitious social proposals to combat poverty, inequality and exclusion, some of which arouse fears among investors and businessmen.
The biggest drop in the local stock market occurred in the stock of the oil company Ecopetrol, which plummeted 11.9% to 2,431 pesosamid uncertainty over some of Petro’s proposals, such as suspending the signing of new hydrocarbon exploration contracts, banning fracking and his speech against the extractive industry.
“In the short term, we expect the (Petro) administration to look to broaden its coalition and not anticipate disruptive policy proposals. When it comes to risks, the oil sector and the pension system are likely to be subject to more uncertainty,” Morgan Stanley added.
Spreads of Colombian government debt against US Treasury bonds increased to 411 basis points as measured by JPMorgan’s EMBIG-D Index, the highest since when it touched 419 basis points on June 14 and up from a close of 383 basis points on Friday.
“Uncertainty on the economic front is the key challenge Petro is likely to face in the coming days. Investors are likely to have to deal with high oil prices and its policies,” Citi opined.
While, prices of dollar-denominated bonds fell from 0.36 cents per dollar due in 2023 to about 3.5 cents per bond due in 2033.
Bonds due in 2051 and 2061 fell 1 cent and 1.9 cents, respectively. The bonds have a yield of between 4.2% and 7.9% on all maturities.
in the local market, TES domestic debt securities due March 2031 were down at a yield of 11.975%, from Friday’s close of 11.29%.
Source: Ambito
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