This time, not even the expectations of a bad electoral result for the Government end up enthusing investors. Although the polls indicate that the legislative ones could bring an even worse result than that of the PASO for the ruling party, the markets prefer to wait a little longer. Most of the great players have already burned with Argentina betting on Mauricio Macri and they don’t want history to repeat itself.
The main doubts of the big Wall Street banks and local brokers are not so much about the result of the elections on November 14, but by the direction that the economy will follow in the following months. The tightening of the exchange rate market and the price freezes were, in this sense, bad indications of what may be to come.
Both the exchange rate and the bonds clearly reflected yesterday, and have been doing so for several weeks, these fears. Yesterday the free dollar ended slightly below the close on Friday, but the “cash with settlement” reached a new record of $ 213. The bonds also reflected the lack of total market interest for incorporating Argentine assets and the country risk settled the last week above 1,700 basis points, the highest level since the debt restructuring of just over a year ago.
The timid bets that appear are channeled into stocks. The reason is quite obvious: the possible positive impact of a change in the political climate would have a much more favorable effect on the stock market than in the case of debt. However, most papers don’t get too unstuck either. The Merval index today has a value equivalent to only $ 410, but in the best moment of the Macri government, before the crisis broke out in 2018, it had reached 1,800. Therefore, there is a huge margin of recovery from very low levels.
Today there is already a quite remarkable decoupling between stocks and bonds, which could deepen after the legislative elections. For investors, the possibility of a new restructuring is very feasible beyond a political sign change in 2023
This scenario could give more impetus to the “decoupling” that already exists today between the somewhat firmer behavior of stocks and the extreme weakness shown by bonds.
For a market that bets against Kirchnerism, it is still striking that with less than two weeks until the elections there is no certain euphoria about being placed in local assets. Especially considering that there was already a forceful result against the Government, which was in the PASO of September 12. Everything indicates that it will be extremely difficult for the ruling party to reverse that result, although the end is still open in districts such as the province of Buenos Aires.
What, then, is behind the caution of investors? Basically what is weighing on now is the fear of a much more complex financial and currency situation after the elections. The scarce liquid reserves held by the Central Bank, the strong monetary issuance carried out by the BCRA – and which will accelerate in the last two months of the year – and the delays in reaching an agreement with the IMF complicate the outlook much more.
“It is possible that there will be a currency or financial crisis in the coming months. Even more reasons to buy Argentina, because the chances of this Government to continue in 2023 will evaporate ″pointed out one of the most optimistic Wall Street analysts.
What, then, is behind the caution of investors? Basically what is weighing on now is the fear of a much more complex financial and exchange situation after the elections
The fall in bonds also reflects pessimism about Argentina’s future payment capacity. The exchange carried out by the Minister of Economy, Martin Guzman, It allowed the maturity of the bonds to be extended by three years, but it did not reduce the volume of debt. Up to now, nothing happened to allow us to be more optimistic about Argentina’s ability to pay in 2025, when there are already millionaire maturities of the new securities issued in the last restructuring.
Investor apathy with Argentine assets may also be related, at least partially, to the bad times Brazil is going through. The dollar climbed to 5.65 reais, there was an outflow of capital and also a fall in the main shares of that market, in a context of higher inflation and also political doubts due to the elections next year.
An agreement with the IMF could help to harness expectations, but the G20 meeting in Rome made it clear that a settlement is still a long way off. In the best of scenarios, at the end of the first quarter of next year, a commitment could be sealed that allows Argentina to kick the millionaire payments that it must make.
But today thinking three or four months ahead is too long and this is reflected in the apathy of investors and the behavior of the dollar, which began to take off in the middle of last month and continued to pick up speed at the opening of this week.