Negative market reaction to Caputo’s statements: sharp decline in stocks and growth of the free dollar

Argentina’s stock market was mostly lower on Monday, in a cautious business environment awaiting details on the implementation of the second stage of the economic stabilization plan announced by the ultra-liberal president. Javier Miley.

“It was a day for oblivion“The market operator said. “Financial dollars have skyrocketed, up more than 4% in both MEP and cash. This was as a result of Friday’s announcements, which had little taste for the market “Who is concerned about the accumulation of reserves and the exchange rate situation in general,” he concluded.

On Wall Street Dollar-denominated shares and ADRs of Argentine companies fell by 10%led by bank papers. Dollar bonds lost 2%, and Argentina’s country risk has once again exceeded 1,500 points bases, the highest since June 11. Alternative dollars also rose, setting record prices in all their quotations. above 1400 US dollars and the currency gap is above 50 percent.

During this new period, it was announced that the Central Bank would cease issuing money to finance its remunerated liabilities and that the transfer of liabilities to the Treasury would be carried out under a new Monetary Regulation Bill.

Clearing and settlement agent Nayx In his report, he noted that the announcement “has three main immediate effects: 1) it strengthens the fiscal signal by committing the Treasury to having the necessary funds in case of a need to buy back or pay bills; 2) it will increase the short-term interest rate, which will occur either because of tax or market problems; and 3) it will significantly improve the BCRA’s net reserves to liabilities ratio.”

For Sovereign bondsthe reactions were also negative. The names of the 2020 debt swaps are Globales under foreign law and Bonares under Argentine law. They cut 2.7% on average. Therefore, country of risk JP Morgan, which measures the spread between U.S. Treasury bond rates and similar emerging issues, put Argentina’s at 57. 1513 points bases at 17:30 maximum from June 11.

Sovereign bonds on the open electronic market (MAE) fell by an average of 1% in pesos after closing June down 0.4%.

Meanwhile, the leading stock index S&P Merval from Buenos Aires lost 1% in pesos to 1,594,733 units, after improving 2.2% in the last week and falling 2.4% in June. The companies hit hardest were Banco Hipotecario (-6.3%), Sueprvielle (-6.5%) and Banco Francés (-4.9%). Of Argentina’s 44 largest companies, 29 fell today.

On Wall Street, the fall in stock prices of Argentine banks has been particularly noticeable. Banco Supervielle lost 9.7%, followed by Grupo Galicia (-9.4%), Banco Macro. (-7.5%) and French bank (-6.3%). Roles Edenor (-8.8%).

“The market is waiting for the fine print of the announcements, while keeping an eye on what is happening with the price of financial dollars, the accumulation of reserves and the peso interest rate,” he said. Alejo Rodriguez Casiofrom Argentina’s capital markets.

Government officials met with banks on Monday to agree how the transfer of liabilities to the Treasury would be handled under a new monetary policy bill expected to be finalised later this week, he said. Reuters official representative.

“The new monetary policy letters are likely to be the final step in ending the BCRA Pass/Leliqs ball,” the economist commented. Roberto Gerettofrom Fundcorp. “The question that needs to be addressed is what financial costs this will entail and whether, being short-term, they will also be a drag when it comes to raising rates, where the costs are passed on from the BCRA to the Treasury but remain at the aggregate level,” he added.

He On Monday, the free dollar rose 40 pesos, or 2.9 percent, to $1,405. The new maximum denomination is on sale. In 2024, it will increase by 380 pesos, or 37.1%. With the wholesale dollar rate rising by two pesos and eventually trading at $914, the currency gap has widened to 53.7 percent.

“Financial and free dollars continue their upward reversal (peso downgrade) as the dollarization bias remains stronger than in the first reading from which the economic statements come out,” the economist said. Gustavo Ber.

“With the ‘gap’ already at 50%, it needs to be stabilised in the short term to avoid distortions and a deterioration in expectations, which have played in favour of Milei’s rule since early December,” he added.

“With the new monetary policy bills coming from the Treasury, not the BCRA, we could see rates rise and even return to positive real yields,” Rodriguez Cacio estimated. “The latter could help reduce demand for dollars and narrow the currency gap, which is a key issue for a potential exit from equities,” he added.

Meanwhile, the longest dollar futures positions have increased by 1.2% in 6 months and 2.2% in 9 months. The increase brings the long positions to an exchange rate of almost 1,400 pesos.

While the private offering showed weakness in early July, with $225 million being discussed in the cash segment, The Central Bank has seized the initiative a buyer in the wholesale market after three consecutive rounds of sales and won 50 million US dollars for its stock exchange participation.

Meanwhile, Booking The Central Bank’s international operations grew by almost $600 million (from US$598 million to US$29,614 million) for official purchases, but above all for accounting adjustment positions in bank capital in dollars, which in the same proportion explained a significant part of the fall in assets at the end of June.