Markets see more dollar rally, more inflation and more controls on the horizon

The country’s risks came to breach the 1,800 basis point cap, spurred on by its problems – freely available reserves are practically depleted – and by the 10 percent collapse of the Turkish lira against the dollar. Any gust of wind in Argentina is a storm. TheInvestors decided to dispose of domestic assets and the country risk was eventually adjusted by 41 units to 1,795 basis points. For this to happen, foreign debt securities with foreign law lost 1.8% offshore.

The country’s weak position puts it in a weak position to negotiate with the International Monetary Fund. With these levels of state risk, the price of domestic bonds is approaching pre-default levels. The financial markets worsened after the elections, reflecting the lack of confidence in investors That the government can conduct successful negotiations with the International Monetary Fund in the short term. What they see on the horizon is a higher dollar, more inflation and more controls.

But the biggest fear is the collapse of bank stocks, triggered by persistent rumors that the central bank will exchange Leliq’s holdings of entities for bonds. This explains why the stock market, with a turnover of $1.755 million, experienced sharp declines. The Merval blue chip index gained 2.75% and the banks that make up the leading board lost up to 6.19% as was the case with BBVA and 4.48% when it came to Banco Galicia. Since the election, the stock index has lost 11.80% and shares like Banco Galicia are down $2. The dollar valuation of Argentine companies has reached unimaginable ground.

ADRs – certificates of holding shares listed on the New York Stock Exchange – traded in a good volume of $3,676 million and the increases prevailed, after Monday’s crash in the US. It was the best performance testimonials Central Puerto (+4.70%), ternium (+2.45%) e IRSA Commercial Properties And ternium (+ 2.13%).

In the foreign exchange market, there were rearrangements after the remaining trends on Monday, the day when global stock markets operate. That’s why there was a negative reaction to the bonds that dragged down the previous day in overseas markets.

The demand for money dollars started and then stabilized, but the volatility is back. MEP traded at $208 on occasion and then fell to 204.50 to close at $205.82 (+ $2.79). The funny thing is that on the official market, where there was no intervention from the Central Bank, it closed 60 cents more expensive than in the GD30 market, which is the freest market. The same thing happened with cash with liquidation. On the box GD30, it finished at $218.25 (+ $2.68) and in Jun 30 at $216.95 (+ $2).

The “blue” or free dollar was excluded from this business due to the insignificance of its operations and dropped 50 cents to $201. It’s the cheapest dollar in the system, outside of commercial, official, and solidarity dollars.

The central bank continued its exchange rate policy and the dollar wholesale price rose 12 cents, at a rate of 4 cents per day for Saturday and Sunday, and It managed to buy 30 million USD that did not prevent a decrease in reserves by at least 123 million USD to 42,150 million.

In the futures market, due to exchange pressure from the central bank, they have made a return at the end of each month. year-end return 0.23% to $105.02; End of January 0.27% to $111.02 and end of February 0.38% to $115.51.

According to the Buenos Aires Valores (BAFSA) Weekly Report, “The BCRA will accelerate the rate of official dollar devaluation in the coming weeks, possibly awaiting political endorsement to do so in the face of the “multi-year plan” that Alberto Fernandez announced they would send to Congress in December.In the context of negotiations with the International Monetary Fund. However, we also believe time is ticking: BCRA sold over $115 million in MULC during the week, resulting in a November net sales buildup of just over $775 million.”

“We understand,” the report adds, “that although the political will is to await further tariffs with the IMF and Congress, market times may not align with this will, primarily due to Weak international reserves position (some measurements already put net liquid reserves close to zero) And because there is no stock, because it depends on the flow that today has every incentive not to show up: issuers delay foreign exchange settlement as much as possible, and finance themselves at rates in pesos lower than the implied rates in dollars. futures, and importers speed up their purchases. For this, We cannot rule out modifications in the exchange regulations by the BCRA, as it has been doing so far: adjusting the exchange rate and loosening it according to their needs and the availability of dollars, which in turn are determined by the flows.”

Regarding the downward trend of debt securities, BAVSA notes that “with lower net reserves and an unclear outlook, we believe the market is penalizing bond prices due to the international reserve position, a key point calculating repayment capacity.”

To sum up, there is one word in the foreign exchange market: deflation. The stock made it necessary to reduce the dollar business. For example, MEPs negotiated half of what was working a month ago, while money negotiated a 30% settlement. The volatility will continue today and the market is flying blind, with faulty radar.

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