Investors Celebrate 30% Increases in US Dollars for Exchange Rate Peace

Finally a party on the capital market. The Buenos Aires stock exchange ended May with a sharp improvement in ratings, which relieved investors after the heavy losses suffered in April..

It should be remembered that this month was rejected with heavy losses for the S & P Merval stocks, which averaged around 12%, although some papers were well over 20%.

For Eduardo Fernández, badyst at Rava, the change in trend after April "was a very bad month for stocks, which were very aware of local events, such as the rising dollar and the country risk trend ". .

"The obligations of governments have also been affected in their contributions, but mainly because of the great political uncertainty," he added.

But as usually happens, this negative chapter has been closed. In May, the panorama began to brighten and the result was diametrically opposed: the main porteño stock market has ended on a rise of around 15%.

For some badysts consulted by iProfessionnel, the reasons for the recovery can be attributed to the calm that began to prevail around the exchange rate and the prices of some newspapers that were very tempting, beyond the noise coming from politics (especially after the announcement the formula Fernández – Fernández).

In the background, it can be mentioned that it finally entered the category of "emerging countries", which would facilitate the entry of capital into the local market in the medium term..

If you quickly review what happened in the month, the culmination was what happened the first week, during which an increase of about 11% was observed. From then on, he entered a period of relative stability that lasted until the last days of the month, during which he had to deal with a loss of a certain magnitude.

"The fluctuations experienced by S & P Merval, especially at the end of the month, are mainly attributable to external factors," said badyst Agustín Cramo.

On this point, he argued that abroad "Short-circuits in US-China relations and the lack of a Brexit definition once again hampered market development., especially after the resignation of the English Prime Minister ".

And already at the end of the month, President Trump returned to generate market turmoil by announcing that he would raise import tariffs for products of Mexican origin, until they do not take measures to put an end to illegal immigration in his country.

In this scenario, the best results were obtained from the energy papers, Transportadora de Gas del Norte (TGN), Transportadora de Gas del Sur (TGS) and Pampa Energía, which rose by 29.5%, 29.3% and 21%. 5 %%, respectively. Below, Grupo Galicia with 18.5% and Supervielle with 17.5%.

In contrast, BYMA shares fell 8.1% in May, while Aluar fell by 2.9% and Transener by 1.8%.

In terms of paper and ADR of Argentinean companies listed on Wall Street, the increases of TGS (28.7%), Macro (23%) and Pampa (21%) stood out. Despegar (-17.8%) and Tenaris (-16%) were at the other extreme.

On the government bonds side, the best May routes were obtained by the pair at par, up 6.3%, closely followed by Bonar 2037, with a rise of 6.2%. The reduction in dollars, which grew by 5.5%, also worked well.

All this, in a context where the retail dollar has only increased by 1.3%, while retail inflation is estimated at around 3%.

On the other hand, the interest rate on fixed terms, which continues to attract members, was on average slightly above 4%. Thus, those who made a deposit at the beginning of the month have not only won against the dollar, but also against inflation, which does not happen very often.

Balance of the first five months: negative

Since the sharp rise in May, the S & P Merval has recorded an increase of 12.2% since the beginning of the year.

Of course, if you compare this percentage with the two key variables for investors, the result is not very encouraging because In dollars, it recorded a decline of about 4% and prices close to 5%.

Despite this, several stocks post high returns at the end of the fifth month of the year. These are managed by Macro and TGN, as they generate profits in excess of 35% in both cases; YPF follows them, which accumulates more than 32%. The following groups are numerous: Grupo Financiero de Valores (14.4%), Telecom and Grupo Galicia, with an increase of more than 11%.

While on the S & P Merval, Petrobras climbs by 30% and Tenaris by 28%.

The other side of these large increases provides a set of documents that concluded these five months with deep losses.. The list is led by BYMA, which loses 30% of accumulated capital, and is followed by shares of Edenor, which fall by 23%; and those of Supervielle, who lose about 17% in 2019.

During the same period, there were two stocks and one ADR listed on Wall Street that yielded very good results. In this sense, The real star of the market is Mercado Libre, which earns 95%, followed by Macro (13%) and Corporación América, which also added 13% in the first five months of the year. But all is not good news, since Edenor lost 35% over this period and Grupo Supervielle is down 33%.

On the side of publicly traded securities, these five months show a positive trend, mainly those denominated in dollars.

The largest increases were in the rebasing of national legislation, which increases by almost 22%, followed by the pair also in the same currency and legislation, with profits above 19%. The Centenary Bonus (2117) completes the podium with 17%.

As for savers who have opted for more conservative investments, those who chose the traditional fixed terms earned an average income close to 20%that is, slightly above inflation and even the dollar.

In the same way, something better is going to those who bet on UVA-adjusted depositssince the price advance adds the interest rate paid by the respective banks.

Regarding the international context, emerging stock markets are showing a rise in dollars in the order of 4% since the beginning of the year, while the S & P Merval is one. of those who dropped the most (-4.6%); while the performance of the San Pablo Stock Exchange was 9%.

On Wall Street, the Dow Jones rose by 6.6%, the S & P 500 by 10.1% and the Nasdaq by 12.8%, despite the contraction suffered during the month.

On the commodity side, the key figure came from the notoriously high oil recovery, which rose 15%, while gold edged up by -1.7% – in those five months.

In the agricultural products sector, the score was provided by wheat, its price on the Chicago market having risen by 13%, while corn had decreased by 2.5%. In contrast, soybeans managed to overcome a sharp decline and close with an increase of nearly 1%.

What the city is waiting for

In the coming months, all indications are that the market will continue to be affected by rising volatility. Those who know the subject recommend to act with extreme caution.

In this regard, badysts believe that once again, the factors to be taken into account will be both the exchange rate and interest rates.

For Alberto Bernal, of XP Securities, "In Argentina, everything is cheap and the biggest advantage will undoubtedly be that of bonds in dollars and shares".

The badyst added that "an Argentine bond, even with the risk of return of Cristina Kirchner, is that it pays 15%, while in Honduras, it pays less than 5%".

Bernal believes that "these proposals have no logic" and adds that "if we win near the market continuity, this gap must fall considerably, beyond the candidate."

According to Santiago Abdala, director of Portfolio Personal Inversiones, "we do not exclude that country risk may continue to show a decline and, as a result, bond prices improve"

Even if Abdala believes that "going back below 800/700 points at the beginning of the year will be neither immediate nor short-term, especially if the external scenario does not help because of the sounds of a possible trade war" .

In his opinion, "in the action plan the scenario is the same. The market has shown a recovery in recent weeks, also supported by greater local and external volume (but not huge), which has provoked confirmation of entry into the emerging MSCI. "

"However, the volatility will remain high, we believe that today is a position for those who do not fear the risk, and we indicate a positive resolution of the electoral scenario, from the point of view of the market," concludes Abdala.

Regarding the exchange rate, according to Miguel Zielonka, director of Econviews, "the change of monetary regime put in place since April 29 was decisive, because the pure IPO was abandoned and we entered the dirty issue and the market has calmed down "

Daniel Marx, former executive and executive director of Quantum Finanzas, says "what could happen in the coming months"portfolio movements will be the main factor for the future. Some of it has already been released, it has already been dollarized, but I am not saying that this process is over. Although I do not think there is a traumatic scenario. We must see how the political game continues to be put in place. "

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