2023-11-13 08:00:00
By Norberto Sosa (director of Investing in the Stock Market).
Less than a week before the runoff, everyone from the large treasuries to the least sophisticated investor is asking: What do I do with the pesos? Question that we could split into two periods, until next Friday and starting next Monday.
For those of us who are protagonists of the Argentine capital market, we notice that there is a different climate between what happened during the days prior to the first round and what is happening now. In those days prior to the first round, great pressure was noted on the dollar and its alternatives (MEP and CCL) and other types of hedges such as dollar futures on MatbaRofex, linked dollar instruments and even stocks and CEDEARs. At that time, some analysts explained that this situation was generated because although La Libertad Avanza (LLA) expresses some ideas very in line with the markets, such as the fiscal order, many doubts were generated about the implementation of its monetary and exchange policy.
If we pay attention to the consensus of the surveys and what some very prestigious political analysts express, they suggest that the arithmetic would be in favor of the LLA, although they cover themselves by saying that politics could come to play in favor of Unión por la Patria (UxP). .
Although La Libertad Avanza (LLA) expresses some ideas very in line with the markets, many doubts were generated about the implementation of its monetary and exchange policy.
Norberto Sosa, director of Investing in the Stock Market.
But, if the arithmetic would be in favor of LLA, some traders with years in the market wonder, what happens now that the market is calmerto which some arguments arise such as: 1) no one believes in the polls anymore, 2) the support of Macri, Bullrich and Petri for Milei dissipates the uncertainty that the potential implementation of dollarization installed, 3) the market is already excessively dollarized.
The explanation is probably a combination of these three arguments, to which is added an almost suffocating situation of trappingwhere it is no longer known what operation can be done and what cannot be done, with the barrage of regulations generated by the BCRA, the CNV and the AFIP.
Remembering that expression of “he who was burned with milk, sees a cow and cries”, one could come to think that if the CCL reached more than $/USD 1,000 prior to the first round and is now clearly below said value, adding the opportunity cost of the instruments in pesos, then we could conclude that we would not see great exchange rate pressures on the last days of this week.
However, if the new version of said expression is fulfilled, which Patricia Bullrich recently expressed that “he who burns himself with milk, sees a cow and does not cry” We could come to think that perhaps towards the end of the week we will see a little more exchange rate pressureand for those who are “enclosed” by all current regulations, Seek coverage through dollar futures, dollar linked instruments and stocks. Alternatives to which we could add dollar-denominated bonds, whether in the New York jurisdiction (global) or Argentina (Bonares). Taking the analysis one step further, we could also add the CEDEARs.
We could come to think that perhaps towards the end of the week we will see a little more exchange rate pressure.
Norberto Sosa, director of Investing in the Stock Market.
Advancing one step in the analysis and approaching the title of the column, the question that we could add is If we stay in the world of instruments in pesos, which would be better, CER or linked dollar? For which we would begin to analyze what could happen in an Argentina led by UxP or LLA.
The UxP leader has recently expressed that, if he were president, the stocks would be released at the end of 2024, so it is projected that a regulatory transition process would continue, where the different government agencies continue to generate direct or indirect interventions on the various types of exchange. In this context, It is likely that the official dollar will be more contained, but devaluation expectations would continue and would be a cause of inflation that is difficult to moderate.. If this scenario occurs, one might think that instruments tied to inflation expectations, that is, CERs, are a better investment than “linked” dollar instruments.
The UxP leader has recently expressed that, if he were president, the stocks would be released at the end of 2024, so it is projected that a regulatory transition process would continue.
Norberto Sosa, director of Investing in the Stock Market.
The opposite scenario, regarding instruments in pesos, could be the one that takes place in a government led by LLA. In this scenario, It is estimated that an attempt would be made to resolve the monetary and exchange imbalance in less time, which is why “linked” dollar instruments were favored.. Obviously, depending on the success of the implementation of its monetary and exchange policy, it may stabilize inflation or, on the contrary, generate a scenario of its spiraling.
It is highly probable, due to all the shared doubts, that Argentina will enter a period of uncertaintywhere although it is believed that during 2024 there will be a more constructive context in the trade balance, due to a drought that will not be repeated and due to the launch of the new gas pipeline, there are a series of imbalances that would need to be resolved.
In a government led by LLA, it is estimated that it would seek to resolve the monetary and exchange imbalance in less time, which is why it favored “linked” dollar instruments.
Norberto Sosa, director of Investing in the Stock Market.
To the extent that the new president orients himself towards a more orthodox or radicalized profile, economically, the probabilities of a better future will increase, but the short term will be more complex to navigate. On the contrary, To the extent that substantive measures continue to be extended over time, the transition would be less conflictive, but the future would be grayer..
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