The S&P Merval fell 16% in a week: is it worth selling?

The first week of September came with sharp falls in local financial assets. The S&P Merval suffered a hard setback after eight consecutive rounds of decline, accumulating a decrease of 16.11% in the week. Meanwhile, the Merval in dollars has already fallen 15.4% since the end of August. To this, of course, is added the poor performance of bonds, such as the GD30, which fell 11.6% since August 29.

That said, many investors are beginning to wonder if this situation will continue or if the strategy needs to be rearranged again for October.

The fall of the S&P Merval: what are the causes?

Econviews, In his weekly report he explained that it is possible that the market is “incorporating the risks facing the country into prices.” “In addition to the fact that the current situation is very delicate, the results of the PASO do not allow us to calm down. The probabilities of a definition between Massa and Milei are not low.”

“Since the elections, we believe that the probability of negative scenarios occurring in the coming months increased. With this we do not rule out that any of the candidates can take the correct measures and put the country on track, but we do think that the chances are lower” , said the consultant Miguel Kiguel.

Meanwhile, for Consultationthe correction is due more to “technical rather than fundamental factors, among which we include a profit taking after a few weeks in which the entire spectrum of pesos reacted surprisingly firmly to the electoral results that predict the disappearance of the peso.”

The consulting firm Fernando Marull and Associates (FMyA) He also raised in his recent report the three reasons for the decline in local assets in pesos:

1. Emerging bonds fall

2. Post PASO, the market is leading the idea of ​​”Milei Presidente” and assumes caution, after months in Argentine assets.

3. Locally, post devaluation, since Wednesday, August 30, investors migrated from assets that functioned as “hedge” to be placed in pesos. That is why all assets valued in pesos fell: Bonds, Shares, Rofex, Dollar Link, CER Bonds.

S&P Merval: is it worth selling?

For investors, FMyA proposes three alternatives according to the investor profile:

• Devaluation Coverage: Although we expect greater calm until October 22, this time is to build a devaluation coverage strategy; then it may be too late.
• Risk Averse: those who have Argentine assets and are risk averse, the uncertainty scenario of the elections suggests lowering exposure; the dollar prices of Argentine bonds and stocks remain at high levels; the Merval at US$770 and sovereign bonds close to US$37, 2-year highs.
• Risk Tolerant: Today the greatest risk that the assets have is surprise and “uncertainty” about the possibility of Milei’s governance and the impact of that on the assets. Those who are tolerant will see how October will turn out. Milei’s economic plan in itself is good for sovereign bonds.