Better business climate in the financial market and …

The market expectations for financial assets they start to appear more optimistic in the second half of March. Country risk has fallen over the past few working days by around 100 points after hitting peaks of over 1,650 units. And the Buenos Aires stock market shares started to rebound after the balance sheet presentation. The increase in dollar purchases from the monetary authority on the foreign exchange market, this is one of the elements that reduces uncertainty and moderates devaluation expectations.

After a significant drop in the price of government securities denominated in foreign currencies, a rebound of more than 4% was observed at the start of the week on certain bonds. The market interpretation is that fixed income assets had bottomed out.

Questions over negotiations with the International Monetary Fund have sparked a wave of bond sales by foreign investors in recent weeks, trying to pressure the government to speed up the deal and force a fiscal adjustment.

The economic team has clarified that negotiations with the IMF will not be hasty, but rather that the main objective will be to ensure social sustainability in the short and medium term. The stability obtained on the foreign exchange front with the reduction of the spread and a large purchase of dollars from the central bank to maintain the level of international reserves increases the government’s room for maneuver.

Actions

On the inventory side, a similar effect is starting to be observed. At the start of the second half of March, a significant rebound was observed in various companies with activities ranging from banking to energy, oil and construction. Some companies rebounded at the start of the week by more than 5%.

Among the factors that affecting in the rebound in equities – which have been hit very hard over the past three years and still remain at historic levels – prospect of economic activity recovery.

The idea that this year the GDP recovery would be closer to 10 than 5% is starting to converge in various reports on the situation distributed to investors in the domestic market. Industry is one of the sectors which has performed well in recent months and is seen as a driving force behind the restructuring of activity.

In the brokerage agency reports, another key element is highlighted to explain a possible change in perspective regarding Argentinian financial assets. It is said that the increasingly voluminous purchases of the Central Bank on the foreign exchange market are an indicator which reassures and at the same time stops speculation.

Reservations

So far in March, purchases of over $ 1,100 million have accumulated, far exceeding the amount pocketed in the past three months. Reserves stood at nearly $ 39.9 billion at the start of this week and are expected to exceed the $ 40 billion range in the coming days.

The prospect is that this trend of buying dollars in the forex market will continue and strengthen when the oilseed crop begins to come in (stimulated by the rector of commodity prices).

Some market documents also indicate that the exchange rate policy has gained credibility, that devaluation expectations have slowed down, and that the weaker adjustment of the official dollar could help moderate the rate of inflation.

For example, it is mentioned that in the futures market, the implicit yield curve has flattened and returned to levels between 32 and 43 percent per annum. When, at the start of the year, it was closer to a 45 to 70 percent range.

The Portfolio Personal agency highlighted this data and also indicated that “the Central Bank has achieved a certain slowdown in the rate of devaluation compared to what we saw in the last week of February. It seeks to reduce the crawling-peg (gradual adjustment of the exchange rate) in order to reduce inflationary pressures ”.