The dollar and the country in 12-A: the "risk of disappointment" appears after Friday's euphoria

On Friday, the market experienced a day of euphoria with bonds and rally shares, as it bet that the government would be well stopped in the primary elections today, on the basis of ## 147 ## # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # # 39; surveys. Analysts warn that the result will mark the economic trajectory until October. If investors' expectations materialize, it could trigger a virtuous circle of exchange rate stability, gradual deceleration of inflation, lower interest rates, stronger growth in Argentine badets and reduced country risk. . But there is a risk that the markets will be exacerbated and that, according to the results of the polls, considered disappointing, the previous rebound is a boomerang: disarmament of positions in pesos, pressure on the dollar and inflation, rising rates, etc. country risk shot above a thousand points.

"The market has experienced a significant rebound based mainly on surveys giving a parity scenario to Macri, the problem is that if that does not happen, and Fernandez's formula is about 42% with 5 points of advantage. Having existed this rebound, tomorrow will probably be an ugly day in the markets, with an increase in country risk, a stock market returning to a profit earned plus an additional loss and upward pressure on the exchange rate, "predicted the financier. Christian Buteler.

The market celebrates in advance a hypothetical good performance of Macri

In this scenario, badysts predicted country, rate and country risk in the event of a positive or negative outcome for the ruling party.

Dollar The retail dollar Friday closed at $ 46.54 and the wholesale trade at $ 45.25. With a favorable result, the consensus is that "it will go down" as savers and investors "will benefit from the real interest rate in pesos". Juan Diedrichs, from Capital Markets, sees "the peso strengthen, although it depends on the continuation of the American trade war. and China. " Mauro Mazzafrom Bull Market Brokers, he predicted that "if Macri wins, he can deposit $ 2 at a time". In an adverse scenario, they agree that "the dollarization of portfolios will intensify" and will raise the exchange rate. But they claim that the value is difficult to predict because it will depend on the BCRA's shares, and if it uses the reserve sales letter in the cash market Juan Salerno, of the Compbad group, speculated that "with a very bad result at the beginning, the exchange rate may rise to $ 50," but he hopes the BCRA will "stabilize it later". Mazza calculated that "the dollar could rise to 48.5 dollars, it is likely that the BCRA will sell on the spot" but "has a back to reduce volatility and not to exceed 51 dollars before October" which is the roof of the region reference

What is country risk, how is it measured and why does it increase

Country risk Friday, the country risk closed at 860 points, having crossed the threshold of 900 points a few days ago. "If Macri is doing well, we will have to create public securities.and we expect country risk convergence at 700 points. If the result is not favorable, the bonds will undergo an adjustment that will result in a country risk of more than a thousand points, "Diedrichs projected. Nery Persichini, from GMA Capital, said that with a good choice "there would be disarmament of dollar positions and migration to peso badets, so that the country risk would return to 800 points. Otherwise, long-term dollar bonds would be between 4% and 5% and country risk above 1,000. Diego Falcone, of Cohen SA, said that "the most advantageous securities if Macri is doing well are the dollar securities, because it will read that the likelihood of restructuring is greatly reduced, and in a world where rates, bonds will continue to They will fly and the country risk will slowly be reduced to 500 points by the end of the electoral process. "On the other hand, he sees" a country risk of more than 1,200 points and a decrease of 6% bonds. and 7% in dollars.

Rate Leliq's rate was Friday at 63.70. There is a minimum floor of 58% guaranteed by the BCRA until July inflation is known Thursday. That day, the BCRA will decide whether to change it or not. Persichini said that with a positive result, "the demand for pesos is likely to increase and the BCRA is not obliged to place Leliq at such a high rate; if it's bad, nobody will want a peso, the BCRA will have a hard time renewing Leliq and will have to offer a much higher rate. "

For Mazza, in the first case "the rate can go down to 58%, although it will cost to fall in August because of inflation, but it will help the peso to appreciate; in a negative context, it could go back up to 70% this month "because it is one of the tools available to BCRA to counter the volatility of the dollar.

Two scenarios

Today's elections are expected in the financial markets, which is a turning point for the financial situation. Based on badysis and beliefs about what each candidate will do in case of gain and valuation of badets from this perspective, he makes predictions. Thus, they estimate a calm dollar or down if Macri is doing well, with a rise in equities and a reduction in country risk, at least initially.

Instead, the reports that circulated in the precedent of the STEP they place a possible dollar jump in case the opposition formula takes off from the official at irreversible levels. In this case, it would not be strange, at first, that stocks and bonds go down and that the country may even exceed a thousand points. However, some ministerial announcements could also reverse it.

F.D.S./