At the end of a busy week, With the rise of the dollar, the fall of the stock market and, in particular, the fall of Ecopetrol’s shares, the financial markets are waiting for what could bring them greater stability again.
Both the dollar and equities felt the impact of recession risks in the United States, after the interest hikes of the Federal Reserve, or a moderation of the high oil prices that have been registered for months.
But the difference in variations in Colombia compared to other parts also shows the impact of internal factors such as elections.
The dollar rose 5.8 percent in the week, to a representative market rate in force today of 4,129.9 pesos. Even on Friday, trading reached a maximum of 4,153.75 pesos, 16 cents below the historical record.
Meanwhile, in the same period, the dollar rose 4.7 percent in Chile; in Brazil, 1.7 percent; in Peru, 1.6 percent, and in Mexico it fell 2.4 percent.
Thus, In the last week, the exchange rate behaved in Colombia against forces that should strengthen the peso. For example, a report by Credicorp Capital underlines that the country’s currency should be supported by the strong economic growth that has been observed, the “interesting” performance of business confidence and the dynamics of remittances, among other facts.
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Stock Market Effect
On the other hand, the Colombian Stock Exchange fell 6.1 percent in the week, losses greater than those of Lima, which fell 4.6 percent; those of Santiago, 1.6 percent; from Brazil, 1.2 percent, and from Mexico, 0.6 percent.
And on the stock market, Ecopetrol – including the 6.7 percent rise on Friday – ended the week with a loss of 22.5 percent. And it should be remembered that within the campaign, the elected president, Gustavo Petro, announced that he will stop oil exploration contracts.
Felipe Campos, manager of Economic Studies at Grupo Alianza, says that “de Ecopetrol’s drop of more than 20 percent since Friday (June 17) I would say that 60 percent is politicalbecause compared to the world no one falls as much or more.
For example, in the Petrobras region it fell 3.7 percent. And outside the region, BP and Chevron gained 1.8 and 0.9 percent, while Shell and Exxon fell 1.1 and 2.4 percent, respectively.
Experts say a return of calm to markets will depend on signals about the new government’s course.
“So it’s key that the new government give out what information it can quickly, like the names of its ministers, to promote calm,” says Campo.
Some of those indications could come from the sectoral meetings between the outgoing and incoming governments that begin on Wednesday with Transport, Commerce, Labor and Finance..
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waiting for signs
According to a JP Morgan report, “If the president-elect affirms that he does not intend to rewrite the Constitution, unlike the Peruvian and Chilean cases, or there is a gradualism in his initial speechalong with the moderate names being discussed for finance minister could be seen as a silver lining, but it would have a short-lived effect.”
Juan David Ballén, Director of Analysis at Casa de Bolsa, agrees on the importance of the name of the Minister of Finance to appease volatility as well as “a moderation in the tone of the president-elect and more information on how he plans to carry out his proposals made in the campaign”, with which “the markets could return to calm and regain lost ground”.
For his part, Campos explains that “the market quickly discounts new information in the first few days, and political volatility does not tend to last for many more days.”
But after the signals that are expected in the immediate future are received, JP Morgan says that “volatility is likely to remain high in the coming days and we continue to believe that the medium-term outlook for the Colombian peso and the TES will be challenging. Colombia has a high fiscal deficit relative to its peers and this may be challenged by uncertainty over Petro’s agenda. The structural current account deficit is also worrying despite the improvement in oil prices, as imports have increased considerably”.
“With this scenario -says Alejandro Escobar, strategic manager of Sectorial.co-, we will face a few months of expectation and caution from businessmen regarding the reaction of economic players and the rearrangement of sectors”.
According to Sharon Vargas, portfolio analyst at Itaú Comisionista de Bolsa, movements in the local market and volatility will continue not only because of the Colombian context.
“In July, the oscillation will continue due to the rise in the interest rates of the Federal Reserve and the Bank of the Republic. It is not a good time to sell stocks as they remain cheap and most are below book value; in fact, it is a good time to buy titles”, explained Vargas.
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