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Monday, February 6, 2023

Rally of Argentine stocks and bonds: the 3 causes that explain its trigger, according to a city guru

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3. Electoral expectations

According to the economist, the second explanation is due to the election year. Five months after the closing of the lists, 7 of the primary elections, less than 11 months of a possible change of government and the reduction of the probability of a “hectatomb”, “Argentina became a little more attractive to locals and strangers. No We still see a critical mass of investors interested in Argentina, but there is an increase compared to a few months ago”.

The market has high expectations of a change of government: “The logic is that the change of government will bring a more pro-market team with the capacity to eradicate or reduce the fiscal deficit and ultimately stabilize the economy. Something similar happened in 2015, although the situations are not perfectly comparable. At that time, stabilization did not seem so difficult since inflation was at 25%, there was less debt and less poverty. After the bad results of the 2015-19 administration, there will not be much credit for those who It’s your turn to assume. Without ignoring the differences in the case, we see some similar patterns.”

3. Outside winds bring relief

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The third explanation that Kieguel offers is linked to the behavior of emerging markets. “In recent months there has been a downward trend in country risk in several countries in the region, Ecuador is an example of this since it went from having a country risk of 1,673 points in October to 1,148 so far in January.”

What is the fear of the market in this 2023

In the report, the analyst points out at least the most important points that keep investors concerned in this election year:

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1. Macroeconomic imbalances: the exchange rate issue and the pressure on the debt market in pesos.

2. How you are going to pressure the complex electoral process.

In this way, he foresees “almost certainly, that it will imply more volatility down the road and not a straight line.”

Source: Ambito

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