Sovereign bonds rose up to 8% on Wall Street and country risk fell to two-month lows

The Argentine bonds advanced firmly this Monday, November 20 in the US, after the results of the runoff that they dedicated to Javier Milei as the next president of Argentina. At the same time, and hand in hand with YPFwhich flew almost 40%, the shares of Argentine companies (ADRs) that are listed in Wall Street registered a historic rise, on a day marked by the local holiday, which meant that the Buenos Aires stock market did not operate.

Among the biggest increases of the day appeared, the Global 2046 (+7.9%); Global 2035 (+7.7%); Bonar 2030 (+7.5%); Bonar 2035 (+7.2%); and Global 2041 (+7%).

Thus, the Argentine country risk sank 7.2% to 2,243 basis points, the lowest level in two months.

It is worth remembering that this Monday, November 20, is a national holiday for Sovereignty Day, and therefore, local assets did not operate.

Argentine shares flew up to 40% on Wall Street

But the note of the day was given by Argentine stocks, that escalated to 39.9% headed by YPF, which represents an unprecedented daily advance on the New York Stock Exchange.

With this strong increase, the Argentine oil company managed to reach US$15 per share (compared to US$10.73 on Friday) and Its market capitalization exceeded US$15 billion.

But it was not just YPF’s shares that rose strongly. In the wheel, the assets of Edenor (+24.6%); Transportadora de Gas del Sur (+24.6%); Supervielle Group (+23.9%); Telecom (+22.3%); Cresud (+20.4%); Banco Macro (+20.2%);Central Puerto (+20.1%); BBVA bank (+18.6%); Pampa Energía (+17.9%); and Grupo Financiero Galicia (+17.2%), among others.

The volume of ADRs increased sevenfold compared to the daily amount traded on average during the last three months, indicated market sources.

YPF shares

The liberal economist who won the presidential elections on Sunday said he plans to privatize several state companies, including YPF, as part of his strategy to limit the State’s participation in the market and to clean up public accounts. “As long as these structures are rationalized, they are put to create value so that they can be sold in a very beneficial way for Argentines,” Milei said in a radio interview.

The Argentine State nationalized 51% of the oil company more than a decade ago from the Spanish company Repsol. Of the total of these shares, 49% are in the hands of the provinces, which are also owners of the hydrocarbon resources of the southern country.

“State oil and gas company YPF is performing the best thanks to the increasing likelihood of privatization and international price parity,” said Trevor Yates, an analyst at Global X. “While a lower country risk premium should reduce its cost of capital and, in turn, increase production growth profile in the medium and long term,” he added.

“With the victory of Javier Milei and what he proposes for the energy sector, such as a deregulation of the market, the liberalization of internal prices, or a reduction in withholdings on exports, it is undoubtedly very favorable for the price of the shares . But above all, I think the statements made this Monday about his intention to sell the State shares had an impact, although not in the very short term, since first he intends to improve the company’s profitability, clean it up, and then probably go out and sell it. They are signals that the market likes. Both the privatization and deregulation process are going to help unlock value,” he commented to Ambit Lucas Caldi, PPI analyst.

The market’s view after Javier Milei’s triumph

“The large victory in the LLA runoff was positively received by investors during the local holiday, as reflected by ADRs and dollar bonds abroad by registering strong increases from bets taking advantage of their punished valuations, and expectations that a path can be taken to a economic normalization”Gustavo Ber began analyzing the market reaction.

“It happens that the initial speech is opening favorable readings regarding the decision to move towards the correction of the serious imbalances accumulated, without gradualism from the current delicate context. Hence, it is expected to know especially the economic team who will be in charge of designing and implementing a comprehensive stabilization plan that seeks to improve the short-term scenario, seeking to reverse the mistrust and vicious circle of recent times. In order to be able to go through an orderly transition during these almost three weeks towards 10-D – with the collaboration of the ruling party beyond the sudden decision of the Minister of Economy – would be beneficial in seeking to avoid incurring greater delays in relative prices in the face of accelerated inflation,” he concluded.

“The president-elect must dissipate the different sources of uncertainty that affect Argentines. He must put on the leader’s uniform from moment zero,” said Pablo Besmedrisnik, director and economist of Invenómica.

“Today’s instability and the sudden changes that are coming in the different Macro variables are a fact. That is why it is important to describe the situation crudely, but at the same time indicate the first signs of an action plan that will end up forming the necessary stabilization plan“, he claimed.

“It seems to me that it goes have to see some correction but we have to wait for Milei to say (as president, since) many segments of the market were adapting to a victorious Massa,” said analyst Salvador Vitelli.

It is to be expected “a dollar a little more launched and futures a little hotter,” he claimed. “Milei’s speech and the signals he gives will be important, whether it is an ‘incendiary’ Milei like the PASO (August primaries) or a ‘tame’ one in the general elections (October). The latter could be well interpreted by the market,” said Roberto Geretto of Fundcorp.