Lapidary forecast: what can happen in the market if there is no agreement with the IMF

the investment bank Morgan Stanley launched a lapidary forecast for the assets of our country in the event that the authorities decide to break with the International Monetary Fund (IMF).

According to the financial firm, local stocks could fall close to 70% in real terms if the country decides to go to an “autonomy” scenario.

It should be noted that After the Simultaneous and Mandatory Open Primaries of 2019, the Merval fell by 48%, in what was second worst skid in history of a bag, second only to the fall of Sri Lanka in the midst of a civil war.

Nor would the public bonds, which in themselves are heavily punished, be spared in the event of a possible break-up, according to Morgan Stanley.

Sovereign bonds will react negatively in this scenario despite already depressed prices, probably reaching $20“, explains the document.

On the other hand, the report acknowledges: “We may be underestimating the willingness of the authorities to try the path of no agreement“.

On the other hand, Morgan Stanley also admits the possibility of a bullish scenario, or bull market, in case Argentina fixes its problems.

In this possible scenario, the up side long-term real value for domestic stocks is around 230%, which would mean levels of return similar to those of 2018, since “regulated sectors would benefit from the normalization of rates, while banks would benefit from higher growth expectations”.

Dollars in short supply: net reserves do not cover a month of imports

For such a forecast to make sense, according to Morgan Stanley’s point of view, in addition to an agreement with the IMF, a solid and credible fiscal adjustment would be needed.

Now, between the bullish and the pessimistic scenario, the bank locates an intermediate, which is its base scenario: this would imply an agreement with the IMF and a “soft” adjustment.

If this were the case, Morgan Stanley projected: “If it happens, we forecast a long-term rise for local stocks of about 50 percent“.

Nevertheless, the bank advises its clients not to rush into Argentine assets, due to high uncertainty.

The report uses the phrase “wait and see”, which means to wait and see. That is, wait and see if Argentina fixes its macro problems and agrees with the Fund.

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Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Phone : +1 281-333-2229

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