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Markets are in a lull: analysts’ view after a week of financial tension

Markets are in a lull: analysts’ view after a week of financial tension
Markets are in a lull: analysts’ view after a week of financial tension

Markets remained on hold on Friday for adjustments in the economic direction imposed by President Javier Milei, following recent turbulence in the domestic financial market. The blue dollar remains at its highest level, although stocks rebounded and the country risk level approached 1,400 points.

“There are some dark clouds on the horizon to watch closely”said the SBS Group, noting that “we maintain an optimistic view in the medium term on equity, although we emphasize the value of selecting stocks well at this level of the Merval index.”

Amid speculative buying, the leading stock benchmark S&P Merval gained 1.01% at the provisional close, while sovereign bonds in the over-the-counter market went into negative territory with an average of 0.2% after a holiday in the United States that limited business.

The country risk measured by JP.Morgan bank improved to around 1,406 basis points.

Analysts say that a reduction in country risk is a condition for Argentina to return to international markets.

“Regarding volatility (of the markets) in Argentina, in the short term it is uncertain, with prices moving sideways, however, in the medium/long term its trend (of the Merval) continues to rise above the EMA (average) of 200 days”said Rava Bursátil.

The Economist Federico Sturzenegger He was appointed Minister of Deregulation and State Transformation in order to adapt the government organization in line with the process of reducing public spending and increasing efficiency, the official bulletin said.

On the other hand, the announcement of details on a new monetary regulation letter is expected. (‘Leremo’) whereby remunerated liabilities will be transferred from the central bank (BCRA) to the Treasury, a situation that generated greater liquidity in the market due to the dismantling of bank positions and exchange rate pressures.

Analysts commented based on data from the BCRA that on Monday some 1.9 trillion pesos were issued for the dismantling of put positions, or sale options that banks have and can exercise at any time.

“The dismantling of the ‘put’ forces the BCRA to issue pesos and buy securities held by those banks,” explained an analyst.

Amid uncertainty over the new measures, the conditions for the Treasury’s bond auction next week, when some 1.05 trillion pesos mature, are still awaited.

“This auction will take place in a scenario where the market is expectant after the announcement of the ‘Leremo’ bills that, according to the authorities, will dictate the reference rate of the economy,” said Portafolio Personal Inversiones.

“While we await these definitions regarding economic policy, we wonder what strategy the Ministry of Economy will adopt? Will it continue to offer minimum rates? Today’s announcement will answer these questions,” he said.

The peso in the interbank market continued to be regulated by the central bank (BCRA) under a ‘crawling peg‘ from 2% monthly to 916 units per dollar.

The government recently stated that it will maintain the current rate of currency depreciation and the benefits to agricultural exports to reassure the market and rule out a devaluation.

“A gap of more than 50% in the dollar exchange rate complicates the government’s intention to free up the exchange market in the short term,” said one analyst.

In this context, the exchange rates in the alternative markets were set at a low of 1,406.9 pesos per dollar in the ‘Contado con Liquidación’ (“CCL”) exchange and at 1,396.6 units in the so-called “MEP” dollar,

The exchange rate pressures were also reflected in the informal or “blue” market, where it fell to 1,420 per dollar, compared to a historic low of 1,440 units recorded this week.

Source: Ambito

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