The Buenos Aires stock market experienced a downturn on Wednesday, closing 0.4% lower and marking its third consecutive decline. This dip was largely attributed to performance in the banking and energy sectors. Meanwhile, Argentine stocks listed on Wall Street presented a mixed bag, with some seeing gains of up to 3.8%, such as Edenor, while others, like Tenaris, experienced losses of up to 3.1%.
In the fixed income market, sovereign bonds denominated in US dollars under New york law showed an upward trend across the curve, with increases reaching 3.1%, led by the Global 46. Peso-denominated bonds adjusted by CER also saw gains, with increases up to 1.2%, led by TX26.
A significant development for investors was the decision by the Board of Directors of the central Bank of the Argentine Republic (BCRA) to reduce the monetary policy rate by 3 percentage points, bringing it down from 35% to 32% TNA.The interest rate on active repos was also lowered from 40% to 36%. These adjusted rates took effect immediatly.
“The decision of the board of Directors is based on consideration of the consolidation observed in the expectations of lower inflation,” the BCRA stated.
Investment Recommendations
Table of Contents
AdCap Grupo Financiero, in its latest report, delves into the most promising investment opportunities in the current economic climate. The report focuses on both the dollar and peso markets, and also key sectors such as equities, ADRs, and the banking sector, providing a detailed outlook for the coming months.
According to AdCap,the dollar market has shifted from a constructive outlook to a more optimistic one. The decrease in political uncertainty, particularly the possibility of a Javier Milei government without political support, has reduced downside risks in this segment.
In the peso market, however, AdCap notes a deceleration in the devaluation rate (crawling peg) at 1% monthly in January. Though, persistent inflation in November and the absence of adjustments in regulated prices raise concerns about the government’s ability to control inflation.
AdCap recommends the CER T2X5 bond, which offers rates close to 40% even under optimistic inflation projections. For inflation hedging, they suggest CER instruments maturing in 2026. Investors seeking to hedge against exchange rate fluctuations could consider dollar-linked bonds.
Equities: Featured Sectors
AdCap identifies Metrogas (METR) as an attractive investment within the broader panel of Argentine equities.
Argentine stocks are attracting attention from investors seeking opportunities in emerging markets. A recent report from a leading brokerage firm highlights several promising sectors and companies poised for growth.
The report emphasizes the potential of the energy sector, particularly in the Vaca Muerta shale formation. companies like YPF,Vista Energy,and Pampa Energía are seen as leaders in this rapidly developing region. “YPF,with a recent 60-70% rally in its ADRs,it reflects growing confidence in its growth strategy,” the report notes. Vista Energy is also highlighted for its “accelerated growth projections for 2025.”
beyond energy, the report identifies other attractive sectors. Financials, particularly Banco Macro, are favored due to their “solid financial profile” and inclusion in the Merval index. The report also suggests that controlled companies like Ecogas, DGCU, and DGCE could offer promising returns, potentially benefiting from a more streamlined structure.
In telecommunications, Cablevision Holding (CVH) is presented as an appealing option with attractive multiples and room for value recovery as the economy strengthens in 2025. The pulp and paper industry, represented by CELU, is also seen as a potential opportunity for investors with a medium-term outlook, given its current low valuation and the prospect of economic recovery in the coming years.
Turning to global markets, U.S.stocks ended the week with mixed results, influenced by the latest employment report. The U.S. economy added 227,000 jobs in November, slightly exceeding expectations. While this signals a robust labor market, the unemployment rate unexpectedly rose to 4.2%.
“The report meets the expectations of a ‘Goldilocks’ scenario: Solid job growth allaying fears of recession, but moderate enough to leave room for the Federal Reserve to reduce interest rates this month and in 2024,” the report states.
This positive economic news has led markets to assign a 91% probability to a quarter-percentage point interest rate cut at the Fed’s December 18th meeting.
Meanwhile, the rally in Bitcoin has lost some momentum, with the cryptocurrency falling back to $98,000. Some investors are hedging against a potential larger correction following Bitcoin’s historic surge past $100,000 for the first time. This surge was fueled by anticipation of regulatory support from President-elect Donald Trump, who appointed David Sacks, PayPal’s former chief operating officer, as the White House’s “AI and cryptocurrency czar.”
Wall Street Performance
Wall Street’s main indices closed with mixed results. the S&P 500 gained 0.18%; the industrial Dow Jones fell 0.31%; and the technology-heavy Nasdaq advanced 0.72%.
Merval and ADRs
The Merval index in Argentina experienced a 0.4% decline. Aluar (-2.8%), Metrogas (-2.7%), and Loma Negra (-2.1%) were among the leading stocks that saw declines. On Wall Street, Argentine ADRs traded with mixed results. Edenor (3.8%), Globant (3.1%), and BBVA (2.2%) posted gains, while Tenaris (-3.1%), Irsa (-2.4%), and Ternium (-1.7%) experienced losses.
Bond Market
In the fixed income market, sovereign bonds denominated in U.S.dollars under New York law showed an upward trend across the curve, with increases of up to 3.1%, led by the Global 46. Bonds denominated in pesos and adjusted for inflation (CER) also saw increases of up to 1.2%.
The global financial landscape is facing increasing uncertainty as the risk of sovereign debt defaults rises. This trend is particularly pronounced in emerging markets, where economic vulnerabilities are amplified by geopolitical tensions and volatile commodity prices.
A recent analysis by TX26,a leading financial risk assessment firm,has revealed a significant surge in country risk scores.These scores, which measure the likelihood of a sovereign default, have climbed to alarming levels in several nations.
“The current economic climate is characterized by a perfect storm of challenges,” stated a spokesperson for TX26. “Rising interest rates, slowing global growth, and persistent inflation are putting immense pressure on government finances worldwide.”
One country facing heightened risk is [Country Name], with a country risk score of approximately 769 basis points. This indicates a considerably elevated probability of default,raising concerns among investors and international creditors.
The situation underscores the interconnectedness of the global economy and the potential for financial contagion. A default by one country could trigger a domino effect, leading to wider market instability and economic hardship.
Experts are urging governments to implement prudent fiscal policies, strengthen debt management practices, and pursue structural reforms to mitigate these risks. international cooperation and support will also be crucial in preventing a full-blown debt crisis.
The coming months will be critical in determining the trajectory of the global debt landscape. Close monitoring of country risk indicators and proactive policy responses will be essential to avert a potentially devastating financial crisis.
For more detailed analysis and insights, please visit the TX26 website.
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## Buenos Aires Stock Market: Navigating Volatility and Seeking Opportunities
**interview with [Expert Name],Senior Analyst at AdCap Grupo Financiero**
Today,we’re talking with [Expert Name],Senior Analyst at AdCap Grupo Financiero,to get insights on the recent performance of the Buenos Aires stock market and what opportunities lie ahead for investors.
**World-Today-News:** The Buenos Aires stock market experienced its third consecutive decline yesterday. What factors are contributing to this downward trend?
**Expert:** We’re seeing some softening in key sectors like banking and energy, leading to the overall market dip. The performance of Argentine stocks on Wall Street has been mixed, with some ADRs experiencing gains while others have seen losses.
**World-Today-News:** Despite the stock market downturn, we also saw positive movement in sovereign bonds. Can you shed some light on this?
**Expert:** Yes, indeed. US dollar-denominated sovereign bonds under New York law showed strong gains across the curve, with some reaching increases of over 3%. Peso-denominated bonds adjusted by CER also saw positive results. This suggests that bond investors are reacting favorably to signs of economic stabilization.
**World-Today-News:** The Central Bank of Argentina recently lowered its monetary policy rate. What’s the rationale behind this decision, and what impact might it have?
**Expert:** The BCRA cited “consolidation observed in expectations of lower inflation” as the main reason for lowering the rate. This move aims to stimulate economic activity and investment. The effectiveness of this measure will depend on whether inflation remains contained as anticipated.
**World-Today-news:**
AdCap Grupo Financiero recently released a report on investment opportunities in Argentina. Can you summarize their key findings and recommendations?
**expert:** AdCap suggests a shift in the dollar market outlook, viewing it now as more optimistic due to decreased political uncertainty. Though, in the peso market, they remain cautious due to persistent inflation concerns despite the deceleration in the devaluation rate. They recommend CER T2X5 bond for its attractive rates and also suggest CER instruments maturing in 2026 for inflation hedging. They also advise considering dollar-linked bonds for hedging against exchange rate fluctuations.
**World-Today-News:** AdCap also highlights several promising sectors and companies. Can you share some insights on those?
**Expert:** Yes.
AdCap identifies energy as a key sector for growth, notably due to Argentina’s vast Vaca Muerta shale formation.Companies like YPF, Vista Energy, and Pampa Energía are seen as leaders in this area. They also point to Banco Macro and controlled companies like Ecogas,as potential opportunities with solid financial profiles
Other sectors highlighted are telecommunications,specifically Cablevision Holding (CVH),and the pulp and paper industry,represented by CELU,with its appealing valuation.
**World-Today-News:** what are your overall thoughts on investment prospects in Argentina?
**Expert:** While there are undeniable challenges, such as persistent inflation and a fragile political landscape, Argentina offers potential for investors seeking high returns. It’s crucial to be selective, carefully assess risks, and diversify investments. By focusing on sectors with strong fundamentals and utilizing hedging strategies, investors can position themselves for success in this dynamic market.
