Argentine Markets Rebound, Offering Investors New Opportunities
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The Buenos Aires stock market experienced a significant upswing, climbing 1.6% and ending a two-day losing streak. This positive trend mirrored the performance of Argentine stocks listed on Wall Street, with some, like Banco Supervielle, seeing gains as high as 6.3%.
While initially showing weakness, dollar-denominated sovereign bonds under foreign legislation also saw increases across the curve, reaching as much as 0.5%. The Global 2046 bond led the charge, followed closely by the Global 2035 bond (0.3% increase).
Conversely, other dollar-denominated sovereign bonds under foreign legislation experienced declines of up too 1.5%,with the Global 2030 bond leading the downturn (-1.5%), followed by the Global 2035 bond (-1.3%).
Domestically, the Central Bank of the Argentine Republic (BCRA) announced a key measure: companies can now access the Free Exchange Market (MLC) to settle compensatory interest on financial debts with related companies, without prior approval, effective January 1, 2025. “This measure will allow companies to access the Free Exchange Market (MLC) without the need for prior consent,” the BCRA announced.
Moreover, the BCRA also approved MLC access for settling foreign currency debt issued by publicly offered financial trusts, provided these transactions comply with National Securities Commission (CNV) regulations and the funds were initially converted to pesos via the MLC.
Peso Instruments Present Attractive Investment Opportunities
Delphos Investment, in it’s latest asset management tactical report, analyzed the peso debt market and offered investment recommendations.According to Delphos,the current climate presents several opportunities in local currency instruments.
Delphos noted that recent weeks saw increased pressure on peso bonds due to seasonal bank liquidity demands. This, coupled with a monetary policy rate cut and adjustments to the active pass rate by the Treasury, eased these tensions. “The previous weeks were marked by greater pressure on peso bonds due to seasonal demand for liquidity by banks,” the report stated.
This led to a revaluation in the long end of the fixed-rate curve,with increases ranging from 1.5% to 2%, fueled by lower-than-expected inflation data (2.4% monthly).
Regarding peso debt maturities in 2025, Delphos observed that 50% are concentrated in the first quarter. This could prompt the Treasury to employ exchange strategies to extend payment terms, as seen in past tenders. The report suggests that instruments like LECAPs, particularly well-suited to a falling inflation habitat, could benefit from the attractive rates offered.
Disinflationary Context Opens Doors for Investors
Delphos highlighted CER-indexed instruments as an “favorable option” for investors seeking protection against exchange rate volatility and longer-term investments.
The report further indicated that the nominal curve for 2025 shows a negative slope,with monthly returns between 2.5% and 2.8%, while the CER curve maintains a positive short-term slope, stabilizing around 9% annually for longer durations.
While acknowledging the appeal of current peso rates, Delphos emphasized the need for careful consideration of the overall economic landscape and potential risks.
US Markets Rebound Despite Looming Government shutdown and Inflation
U.S. stocks staged a significant rebound on Friday, defying concerns over a potential government shutdown and persistent inflation. The House of Representatives’ rejection of a Trump-backed spending bill considerably increased the likelihood of a weekend shutdown, yet investors seemed to focus on other economic indicators.
Positive economic data, including a slowdown in November’s inflation rate, contributed to the market’s resilience. This follows the Federal reserve’s recent decision to temper expectations for interest rate cuts next year, adopting a more cautious approach to monetary policy. Earlier in the week,a Fed-induced sell-off had sent major indices plummeting. Though,Thursday saw some stabilization before Friday’s rally.
Adding to the market’s volatility, former President Trump renewed his tariff threats against Europe, further impacting global markets. “I told the European union that they must make up their tremendous deficit with the United States by purchasing our oil and gas on a large scale,” Trump wrote on Truth Social. “Otherwise it will be TARIFFS on all fronts!” This statement injected uncertainty into an already complex economic landscape.
Further complicating the picture, investors digested the latest core Personal Consumption Expenditure (PCE) index, the Federal Reserve’s preferred inflation metric. While the data showed a month-over-month decrease in price increases for November, inflation remains stubbornly persistent, presenting a continuing challenge for the central bank’s efforts to reach its 2% target.
Wall Street’s Positive Performance
Major Wall Street indices closed with substantial gains. The S&P 500 surged 1.85%, the Dow Jones Industrial Average climbed 1.92%, and the tech-heavy Nasdaq Composite rose 1.85%, showcasing a broad-based market recovery.
International Market Updates
In Argentina, the Merval, the benchmark index for the Buenos Aires Stock Exchange, experienced a 1.6% increase. However, some leading stocks saw declines, including Grupo supervielle (-4.7%), YPF (-2.7%), and Central Puerto (-2.2%).
Argentine ADRs (American Depositary Receipts) trading on Wall Street largely showed positive results. Banco Supervielle led the gains with a 6.3% increase, followed by BBVA (3.6%) and Mercado libre (3.4%).
Conversely, Argentine sovereign dollar-denominated bonds experienced declines across the curve, with losses reaching up to 1.5%. The Global 2030 bond saw the most significant drop, followed by the Global 2035 bond (-1.3%).
Argentina’s country risk,as measured by the EMBI+,stood at approximately 671 basis points.
Analysts suggest that higher-than-current interest rates may be offered in the coming months to facilitate the refinancing of Treasury commitments, aiming to improve the country’s debt profile and alleviate short-term maturity concentrations.Investors are advised to leverage competitive peso rates and prioritize instruments offering a balance of performance and inflation/exchange rate risk protection.The disinflationary context could present new opportunities in the local debt market.
Argentine Markets Rebound,Offering Investors New Opportunities
After a two-day losing streak,the Buenos Aires stock market rebounded,climbing 1.6% on Friday.this positive trend mirrored the performance of Argentine stocks listed on Wall Street, with some, like Banco Supervielle, seeing gains as high as 6.3%.
While dollar-denominated sovereign bonds initially showed weakness, they later experienced increases across the curve, creating a complex landscape for investors to navigate.
Argentine Stocks and Bonds: A Tale of Two Trends
Our senior editor sat down with Federico Sánchez, Chief Economist at Buenos Aires-based research firm Mercado Strategies, to discuss these recent market movements and what they mean for investors.
Senior Editor: Federico, the Buenos Aires Stock exchange saw a positive shift today. Can you shed light on the factors driving this rebound?
federico Sánchez: Absolutely. TodayS surge is highly likely a technical rebound following two days of losses. Investor sentiment also seems to be buoyed by the performance of Argentine ADRs trading on Wall Street, especially those in the financial sector.
Senior Editor: What about Argentine sovereign bonds? We’ve seen some volatility there.
Federico Sánchez: It’s a mixed bag.While certain dollar-denominated bonds saw increases, others experienced declines. This points to ongoing concerns about Argentina’s debt sustainability and the possibility of future restructuring.
Peso Instruments Present Attractive Investment Opportunities
Senior Editor: Delphos Investment recently suggested that the current climate presents opportunities in local currency instruments. Can you elaborate on that?
Federico Sánchez: Delphos makes a compelling argument. Recent pressure on peso bonds due to seasonal bank liquidity demands has eased thanks to the monetary policy rate cut and Treasury adjustments. This has created opportunities for investors willing to take on some risk.
Senior Editor: What specific instruments are they recommending?
Federico Sánchez: They highlight LECAPs as particularly attractive, especially in a falling inflation environment.These instruments can offer good yields and protection against inflation risk.
Disinflationary Context Opens Doors for Investors
Senior Editor: You mentioned falling inflation. How significant is this factor in the current market landscape?
Federico Sánchez: Disinflation is a crucial element. It’s creating a more favorable environment for investors seeking to enter the Argentine market. CER-indexed instruments, such as, offer protection against both inflation and exchange rate volatility, making them particularly attractive in the current context.
Senior Editor: For investors considering entering the Argentine market, what are your key takeaways from these recent developments?
Federico Sánchez: The Argentine market is showing signs of resilience, with both opportunities and risks. Careful consideration of the economic landscape, inflation trends, and individual risk tolerance is essential for making informed investment decisions.
