After a gain of 67.7% in dollars, the Buenos Aires stock market had the highest accumulated performance of the year worldwide. What to expect in 2024.
2024 Outlook: Which stocks could rise in 2024, after a record year
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Although the S&P Merval in 2023 beat the price increase (with some papers climbing 1000%) since it advanced 360% in pesos (while inflation is expected to be around a 200% increase), without a doubt the fact to highlight is that, measured in foreign currency, advanced 65% and provided the highest dollar return in the year worldwide. So Ambit set out to analyze What does 2024 bring us, key data to analyze the economy and then sector by sector in which it will be convenient to take a position.
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The economic challenges of the Milei Government
A report prepared by Martin PoloChief Strategist of Cohen and Jeronimo MontalvoStrategy Analyst at the same broker, warns: “The government faces an adjustment program and shock reforms. The fundamental pillar is the search for fiscal balance, no small task given that it poses an adjustment of more than 5 pp of GDP. To carry it out, some of the measures may be combined without going through Congress, abusing the liquefaction and increase of discretionary taxesbut another no less minor part – which will give sustainability to the plan – must be approved by deputies and senators, among whom Milei clearly has no advantages. It will be a long process and success is not guaranteed.. Meanwhile, the economy will develop in a context of high inflation and recession, but with improvement in international reserves”.
It is worth remembering that The recent jump of 118% in the official exchange rate, to $800, allowed the Multilateral Real Exchange Rate to be brought to the highest level since the exit of Convertibility but gave an impact to the already high inflation. A situation to which is added the update of repressed prices, which would end up generating a cocktail that would raise the CPI, at least during the summer, to the level of 30% monthly. Salaries would also be hit hard. A loss of 3.3% is estimated in the fourth quarter of this year and 5.5% in the first three months of the year. In addition, consumption and activity would register strong declines.
“With this scenario, a very difficult 2024 would be expected in socioeconomic terms, with a blow to activity, growth in unemployment and rise in poverty in the short term, which will be one of the government’s biggest challenges. However, the inflationary shock of the summer will cool towards the winter in a context of less surplus of pesos and greater supply of dollars that would allow stabilize the exchange rate at competitive values. Thus, it would be observed a gradual recovery of activity which should be accompanied by a continuous accumulation of reserves during the year, to give consistency to the model”the report ended.
What to expect from Argentine stocks in 2024?
With these macroeconomic numbers, How does it impact stocks and stock markets? Let us remember that 2023 was positive, and the upward trend is expected to continue in 2024. This is how it is described Maximiliano Donzelli Head of Research IOL investonline: “The change in discourse by the US Federal Reserve, anticipating a rate cut in March 2024, influenced the rise of international markets. The rate reduction is expected to increase commodity prices, which would benefit a commodity-dependent country like Argentina.“.
Thus, the expert analyzes that A probable increase in commodities would strengthen the Central Bank’s reserves, reducing country risk and improving the national credit rating. “This could improve credit conditions for local companies and attract more foreign investment,” he said, adding: “Although a challenging 2024 is anticipated initially, a positive path is projected later. In this context, the notable companies for next year are Cresud (CRES) and Central Puerto (CEPU)according to the analysis carried out”.
Sector by sector: what could happen in 2024
Now that we have seen what could happen with the Argentine macroeconomy and that we analyze whether the global context could benefit the local stock market, we will see sector by sector how each of them is doing. To Invest in the Stock Market (IEB) it is very likely that in the short term the equity Argentina continues its lateralization, and they maintain that there is still some opportunities in backward sectors that could be favored in the medium/short term due to regulatory changes carried out by the Government.
- Regulated companiesAccording to IEB, there is still attractiveness in those companies that suffered tariff delays, a drop in real terms in their sales and compression of margins in recent years, given that the fiscal adjustment contemplated in the stabilization plan undoubtedly entails a reduction in subsidies, as well as As well as, a sincerity in the relative prices of the economy is expected. Companies like Central Puerto (CEPU), TGN (TGNO4), Transener (TRAN), Ecogas (DGCU2), Autopistas del Sol (AUSO), Edenor (EDN) and Pampa Energía (PAMP). In an environment of decline in economic activity or recession, this sector would be defensive.
- Oil & Gas: For this broker it is “a sector that continues to be attractive to us despite being 30% from its maximums reached in 2018” and they added that it has genuine drivers and solid fundamentals and its development will be crucial for an Argentina in need of foreign currency. YPF (YPFD), TGS (TGSU2) and Pampa Energía (PAMP) for his exposure to Vaca Muerta.
- BYMA: For IEB, this company is an excellent defensive vehicle in the face of the country’s current economic situation, given that it is a market and custody of financial instruments that adjust for inflation or exchange rates and on which the company charges fees.
- Banks: A sector that has been presenting high volatility in line with the announcements that are being made. It is clear that the current averages will have an impact on the banks’ results table, but on the other hand, IEB believes that it could be time to position itself in this sector with a longer-term view and with the caution of the volatility that we believe. which will continue to affect company prices. Their prices continue to lag behind – with ample justifications – but, they maintain, they are beginning to show a much more attractive potential return-risk relationship. It is not a sector for more conservative investors since it is not yet clear what the final impact of the current monetary policy and resolution of repos/leliqs will be, but in the medium and long term. the acThese entry points represent the most undervalued things you can buy in equity today. Argentinian. Within the banking universe, they all have common characteristics: lag compared to maximum values, strong exposure to the public sector. However, each one has its own peculiarity. Galicia Financial Group (GGAL) Although it is not the one with the greatest delay, it stands out for its very high liquidity, Supervielle Group (SUPV) is the one with the most delay despite the rally it has been having in the last few wheels, finally BBVA Argentina (BBAR) and Banco Macro (BMA) They are in similar positions.
Source: Ambito
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