Why the S&P Merval falls: how much is due to the tax on large companies and how much is due to the global context

The market expert Marcelo Bastante indicates that, “until August 31 (and with more force from the STEP), the markets rose uninterruptedly, so August was an exceptional month and you have to go back a long time to obtain a month as prolific as last.”

What happened is that, from August 14 to 31, the market rose uninterruptedly and, from September 1st until three days ago, it fell uninterruptedly. “What there was was strong profit-taking,” summarizes Bastante.

In the words of Joel Lupieri, from Epyca Consultores, “there was a moment of maximum euphoria with respect to Argentine values, in August, more than anything, in equities and that responded to the more pro-market positions that were elevated by the voters in the primary elections.”

However, remember that, on the other hand, “it is natural that, after these moments of strong rise, it is natural that there is a fall”, as was seen between last week and the beginning of this one. Although later he recovered and The S&P Merval rose 11% in three days. But, this Friday, a new decline is observed.

The reasons why the S&P Merval falls

According to many voices in the City, this fall today responds to the Government’s decision to promote a project of Minimum Tax for Large Companies, who joined the Budget 2024 and that he will send this Friday to National Congress. However, it is not the only reason, it also responds to the dynamics seen in Wall Street for these hours.

And it is that the dynamics of the local stock market is closely linked to that of the United States. “In the first days of September, the S&P Merval in dollars had fallen 15% and, in the same period, the main US stock indices had had the same performance as a consequence of the fact that the 10-year Treasury papers of the northern country had increased their yield from 4.10 % to 4.30%”, illustrates in this regard Andrés Reschinianalyst at F2 Soluciones Financieras.

That, added to our problems, is a perfect combo so that there has not been a good performance in the first days of the month. And, this Friday, Reschini indicates that the dynamic is, in part, repeated. “From what I see, we have significant declines in the United States due to new increases in US Treasury debt yields. I think that has a lot to do with the decline in the market today,” he points out.

However, he assures that, as many City agents expected, the tax on large companies that the Government announced that it will include in the 2024 Budget.

The electoral panorama affects the dynamics of the markets

On the other hand, Mateo ReschiniSenior Research Analyst at Inviu, assures that “the Merval’s fall is related to the bad external contextbut the i also affectsncertain electoral panorama and the doubts about what the next Government is going to do.” He comments that what happens, beyond the new tax announced, is that the market tries to protect itself in that context.

“The increases in recent days responded to the fact that the market went overboard with the previous fallsince we come from a time when Equity had a slightly exaggerated rise, but the fall was much harder, it recovered a little and, now, it falls,” says Reschini from Inviu.

But there is no doubt that, as market expert Leonardo Svirsky points out, The announcement of taxes for large companies has an impact, albeit slight, on the dynamics of stocks this Friday. “The issue of lowering income taxes was all very well, but it was not entirely clear how that was going to be financed. Now, it is clearer what is going to be with these taxes and the news does not go down well at all,” he says about it.

Thus, as Bastante explains, “the market he is perceiving signs, such as the doubts that exist about the Argentine economy and some international events, among others.” However, beyond more or less friendly news for the markets, he considers that “There have not been major changes in the Argentine macroeconomy”so it would not be expected that a strong downward trend would begin due to the announcement of the tax, but, yes, how the dynamics of rates in the United States evolve and the definition of the electoral contest in October will be key.