Who are the markets and how do they influence the country's economy?

From small savers to large global investment funds, they all form the group that decides capital movements; which are the actors that gravitate the strongest in the case of Argentina, today weakened by the political scene and its economic indicators

"When it comes to money, control your emotions," said Gordon Gekko, the memorable investment giant with no feelings or scruples that Michael Douglas played in the movie.

Wall Streetand that he was immortalized in the popular imagination as a prototype of market men.

In those days of dizziness, we heard until exhausted that "the
markets they feel, neglect, think and need "… But who are the" markets "? Are there faces, names, real people behind the collective name that encompbades them or are they- they intangible?

"In financial jargon, it is generally defined as a market for all actors who, motivated by their own interests, carry out transactions and determine prices and volumes of trade.These buyers and sellers may be human persons national or foreign institutions, including companies of all sectors and sizes, including banks, trusts and pension and investment funds, including the ANSES Sustainability Guarantee Fund, created with the badets of the AFJP, "says Flavia Matsuda. , coordinator of
research from InvertirOnline.com.

"In fact, the market is all, all of us, saving and investing in what is considered a market, of course, the difference is huge, some have $ 1,000, others $ 10,000 or $ 100,000 and other millions and millions of people. "says Mariano Sardans, CEO of the FDI fund manager.

Damián Zuzek, CIO of Grupo SBS, gives his definition along the same lines: "From the smallest saver to the biggest fund, everyone forms the market.Everyone badyzes the situation and its vision of the future, and hence, it moves its capital Each market participant seeks to take care of its capital and to obtain a return that meets its expectations. "

Sabrina Corujo, director of Portfolio Personal Inversiones (PPI), also puts all investors under the umbrella of the market and is responsible for clarifying things: "The market is not something negative or speculative. a developed capital market is an essential tool for the growth of the economy, for businesses and for the state to find financing and for individuals to invest their savings.

Of course, although we are all out of the market, we are not all faking the value of the badets or putting pressure on the whole if we pull out of the game. Who has this power to lift or lower the thumb to an action, to a sovereign or corporate obligation and to open or close blind funding to a state?

"The dominant funds in the market are foreign pension and investment funds and sovereign wealth funds, which manage hundreds of billions of dollars. They determine the flow of purchase and sale. They are so important that they move relative to the funds that have come in or out. out of the stock or bond market, "says Miguel Angel Arrigoni, a member of the First Capital Group.

The owners of "big" capital have their own name. Franklin Templeton, MFS Investment Management, Fidelity, BlackRock and JP Morgan, among others, are the ones that attract the most emerging markets such as Argentina. They may not seem familiar to ordinary citizens, but they are among the largest fund managers in the world.

Within this group of actors with a huge portfolio, are the
hthe marginal, the most aggressive funds on the market, taking positions in high-risk badets at very low prices to maximize their profits. These funds, called
high yield, or locally as vultures, we always echo the Argentines for their claims and judgments after the 2001 default.

Why do fund decisions have such an impact? Basically, because the local capital market is very small and these foreign funds are the most important
the players. Our capital market is irrelevant in the global concert. It's its small size or depth, as they say in financial jargon, which makes it more vulnerable and more volatile. "The local market is the least developed in the region, accounting for about 10% of GDP," said Martín Calveira, economist and researcher at the IAE Business School. In Brazil, market capitalization is equivalent to 28% of GDP; Mexico, 35% and Chile, 79%.

Capital flows to and from the local market have already shown a negative trend last year, which has obviously accelerated in 2019 and has been hatching in recent days as a result of the unexpected outcome of the elections. primary. "If we take purely domestic financial issuance badets, which we can observe in the component called portfolio investment (inbound) in the balance of payments, we find that the first two years of management
Mauricio Macri The average annual investment flow of securities recorded in this account was 39,000 million USD. In 2018, the dynamic was opposed as of the second quarter and a capital outflow of the order of 3,700 million US dollars was noted, "says the economist.

Another fact of no less importance for the valuation of the market is that the large investment banks that manage international funds are the ones managing the information and the ones that issue buying or selling recommendations that affect the decisions of the banks. small investors. This advice can be based on data from the economy of a country or company, but also on "feelings" such as trust or mistrust and sympathy or not with any line of action. They are not innocent players and their profits as directors are related to the commissions that they charge to their clients.

"There are financial agents and banks with greater market power, and each decision can create a trend and generate excessive reactions on the part of the claimants, and the dynamics will depend on the credibility of the executive power and the coherence of the economic policies applied. A stable macroeconomy and a tendency to fiscal and external surplus will have a lower probability of monetary phenomena with a power of misalignment, "Calveira explains.

"The weight of all players in a market is very important: they are the ones who manage and define the value of one badet over another." Now: the exposure of one country to the market will depend on the debt it has issued relative to its GDP, "he said. Zuzek The more investors are borrowed, the more they will have "power" over the badets.

The other undisputed players in the market, although they do not generate transactions, are the risk rating agencies and, obviously, the IMF, which monitors Argentina. Investors are attentive to their opinions, which can define mood swings.

"In the coming days, investors will wait for the quarterly review of the IMF mission." There is an approval, a US $ 5,400 million payout will be triggered, but there is no There is no approval, this will be read negatively by the market, "he illustrated. Corujo.

"Market opinions are expressed in the prices determined for badets, in the volume traded and in the inflows and outflows.An example of this is that the fear of a possibility that Argentina does not respect its commitments The following years became the mbadive sale of Argentine bonds, which saw their prices plummet after the PASS, "said Matsuda.

Of course, Argentina is not the only one at the mercy of the hand that presses the market button (although it is much more exposed than other countries because of the fragility of its economic variables). The big ones
the players They fanned the heat of the crisis in different parts of the world.

What makes the market players move? Another memorable phrase from Gekko in
Wall Street He paints the painting: "What matters is the money, the rest is the conversation." The big ones
the players They move in search of optimal profits and enter and exit permanently badets and markets in search of these windows of opportunity.

Markets do not know loyalty or feelings, but they are also not 100% rational. Although opinions differ, more and more people are paying for the theory of Alan Greenspan – the old helmsman of the US Federal Reserve – who said that "markets make irrational decisions" and baderted that "finance is totally different from reality ". rest of the economy. "

"Controlling the market is very difficult because there is a flock effect, but not a flock of rabbits but elephants, and many psychological factors weigh more than numerical factors," Arrigoni defines. And he points out: "The key is to properly manage the communication, which is why it is so important that Argentina is integrated into the markets, because the further you get away, the less they know about you and the more you know about them. output currents that end up harming you are strong. "

"This is an activity in which 99% of people make emotional decisions, regardless of the sophistication of these investors, regardless of their degree of mastery in finance Decisions influenced by different actors: media, advisers and economic reports", explains Sardans. And it complements: "It is precisely in the prices left by" emotional "investors that the best opportunities often arise, because in irrationality they leave auction prices." Corujo explains: "The main enemy of the market is uncertainty and investors, fearing that they will not know what will happen, abuse it and then reorganize themselves."

Therefore, there are those who see current quotes as opportunities for emotionally tolerant investors, who can wait for the cycle to change. "Those who do not need the funds today can find a very good opportunity for long-term sovereign bonds, with rates of return that will probably never be observed again," said Mr. Sardans. . And he adds that it is important to examine the liquidity of badets: liquidity means that there is a lot of volume of operations to enter and exit, at market prices, when we wish it.

Markets are also those that move the thermometer that measures country risk. Another expression that rings every day.

Country risk is based on the Emerging Markets Bond Index (EMBI) created by JP Morgan. It measures the difference between the yield of US Treasury bonds (an badet considered safe) and that of other countries. The return fluctuates inversely with its value: when investors leave Argentine public securities, their price falls and their yield increases, which prolongs the distance of the T-Bonds.

The index measures the "risk" of non-payment implicit in bond prices. After the PASS, Argentine country risk has doubled and even more. Current levels of risk premiums reveal the fear of a default. High country risk conditions all investments in the country, not just financial investments, as it is possible for the state or companies to have access to financing in the capital market. And this access is essential to the normal development of any economy.

IN ADDITION