The country risk came to pierce the ceiling of 1,800 basis points, driven by its own problems – the freely available reserves are practically exhausted – and by the 10% collapse of the Turkish lira against the dollar. Any gust of wind in Argentina is a gust. LInvestors decided to get rid of local assets and country risk was readjusted at the end with a rise of 41 units to 1,795 basis points. For this to happen, the foreign debt bonds with foreign law lost 1.8% abroad.
The country’s situation is weak and leaves it in a weak position to negotiate with the IMF. With these levels of country risk, the price of local bonds is close to pre-default levels. Financial markets worsened after the elections and reflect a lack of confidence in investors that the Government can carry out a successful negotiation with the IMF in the short term. What they see on the horizon is a rise in the dollar, more inflation and more controls.
But the biggest fear is the collapse of bank shares, dragged down by the persistent rumor that the Central Bank is going to exchange the Leliq holdings of the entities for bonds. This explains why the Stock Market, with businesses for $ 1,755 million, has suffered sharp falls. The Merval index of leading stocks yielded 2.75% and the banks that make up the leading panel lost up to 6.19% as was the case with BBVA and 4.48% when it came to Banco Galicia. Since the elections, the stock index has lost 11.80% and shares such as Banco Galicia have fallen by 2 dollars. The valuation of Argentine companies in dollars reached an unthinkable floor.
The ADRs – certificates of holdings of shares that are listed on the New York Stock Exchange – traded a good volume of $ 3,676 million and the rises predominated, after Monday’s collapse in the United States. The best performance certificates were Central Puerto (+ 4.70%), Ternium (+ 2.45%) e IRSA Commercial Properties and Ternium (+ 2.13%).
In the foreign exchange market there were rearrangements following the trends left on Monday, the day on which the world’s stock markets operated. For this reason, there was the negative reaction of the bonds that dragged, the decline of the previous day in foreign markets.
Financial dollars started in demand and then settled, but volatility returned. The MEP traded at $ 208 at times and then dropped to 204.50 to close at $ 205.82 (+ $ 2.79). The curious thing is that in 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. The same thing happened with cash with liquidation. In the GD30 square it ended at $ 218.25 (+ $ 2.68) and in the GD30 at $ 216.95 (+ $ 2).
The “blue” or free dollar, was left out of this business due to the insignificance of its operations and dropped 50 cents to $ 201. It is the cheapest dollar in the system, outside of the commercial, official and solidarity dollars.
The Central Bank continued its exchange rate policy and the wholesale dollar rose 12 cents, at a rate of 4 cents a day, accounting for Saturday and Sunday, and was able to buy USD 30 million that did not prevent reserves from falling no less than USD 123 million to 42,150 million.
In the futures market, due to the exchange pressure of the Central Bank, they yielded every end of the month. End of the year it yielded 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 weekly report of Buenos Aires Valores (BAVSA), “The BCRA will accelerate the devaluation rate of the official dollar in the coming weeks, perhaps waiting for the political endorsement to do so in the face of the ‘multi-year plan’ that Alberto Fernández announced that they will send to Congress in December, in the framework of negotiations with the IMF. However, we also believe that time is pressing: the BCRA during the week sold more than USD 115 million in the MULC (Single Free Exchange Market), accumulating net sales in November of a little more than USD 775 million ”.
“We understand,” adds the report, “that although the political will is to wait for further definitions with the IMF and Congress, perhaps the market times do not coincide with this will, mainly due to the weak position of international reserves (some measurements already place liquid net reserves close to zero) and, as there are no stocks, because it is dependent on a flow that today has all the incentives not to appear: exporters delay the settlement of foreign currency as much as possible, financing themselves at rates in pesos lower than the rates implicit in dollar futures, and importers speed up their purchases. For this, we cannot rule out readjustments in exchange regulations by the BCRA, as it has been doing up to now: adjusting and loosening the exchange rate according to their needs and availability of dollars, which in turn are determined by the flows ”.
Regarding the downward trend of debt bonds, BAVSA points out that “with net reserves that have been decreasing and with an outlook that is not clear, we believe that the market punishes the prices of bonds due to the situation of international reserves, key point to calculate the repayment capacity ”.
To summarize, in the foreign exchange market there is one word: shrinking. The stocks made it necessary to reduce the volume of business in dollars. For example, the MEP negotiates half of what it operated a month ago and the cash with settlement 30%. The volatility will continue today and the market is flying blind, with a faulty radar.