Argentine financial assets weak due to precaution against key mid-term choice

Stock Photo – A woman walks in front of the headquarters of the central bank of Argentina, in the financial center of Buenos Aires. Feb 19, 2020. REUTERS / Agustin Marcarian

By Jorge Otaola

BUENOS AIRES, Nov 12 (Reuters) – Argentine securities closed lower on Friday and the central bank (BCRA) actively intervened to contain the foreign exchange market, in the face of foreseeable tactical portfolio rearrangements awaiting the legislative elections on Sunday that they are considered key to the political and economic future.

Apart from pre-election coverage and trying not to be positioned in pesos, investors await the result of the polls to see what reaction the administration of President Alberto Fernández will have as of Monday.

Recent polls indicate that the center-right opposition would once again defeat the ruling Peronism in the November 14 elections, after a resounding victory in the September primary elections. If so, the ruling party would lose the majority in Congress.

“The die is cast,” paraphrased Roberto Drimer, director of the consulting firm VaTnet. “The presumed electoral defeat of the ruling party would predict greater dissension within its bosom (…) The fights between the helmsmen in the midst of a financial storm do not usually turn out to be good news for the markets,” he said.

Along with the political doubts, the economy looks at the notorious weakness of the peso, the slow negotiations with the IMF for a millionaire debt, a very strong inflation of more than 50% per year and a growing fiscal deficit with monetary issuance.

* The Buenos Aires stock exchange S&P Merval lost 1.02%, to 94,963.42 units as a provisional close, after a bullish start and marking an intraday historical maximum value of 97,024.42 points this week.

* “After the elections will come the reactions and political strategies of the ruling party, and of the opposition, which are key to assessing the viability of facing an area of ​​consensus that allows progress towards an agreement with the IMF and a convergence in economic imbalances” , said the economist Gustavo Ber.

* He added that “investors expect news in the short term since they recognize that the current dynamics is not sustainable, and that is why urgent definitions are required to avoid a new crisis in time.”

* In the exchange market, the wholesale peso depreciated a slight 0.02%, to 100.22 / 100.23 per dollar, thanks to the permanent liquidity regulation imposed by the central bank (BCRA) that had to sell about 290 million of dollars and lose about 620 million in the last four days.

* Gustavo Quintana, operator of PR Corredores de Cambio, stated that “the volume traded today (Friday) in the cash segment is the highest since October 25, 2019.”

* In the opinion of the analysts, the strong search for dollars ratifies the fears of a possible further acceleration in the rate of devaluation, although the Government denies this alternative despite the abrupt exchange gap with alternative markets of almost 100%.

* “We believe that, given the excess of pesos and the high demand for dollars, under these levels of uncertainty and mistrust, something has to happen in the real exchange rate,” said the consulting firm Portfolio Personal Inversiones (PPI).

* The national currency in other alternative rounds such as “Cash with Settlement” was weak to 184.1 units, to 184 in the so-called “MEP dollar” and to 215 units in the bilateral negotiation “Senebi”, with an agile participation of the BCRA through the sale of assets.

* In the informal market, the peso recovered a strong and unusual 3.3% to 200 units for sale, with the help of “friendly hands” related to the Government, after reaching a historical minimum value of 207 for each the day before. dollar. The gap was located at 99.5% before the polls show their legislative results.

* The Argentine country risk prepared by the JP Morgan bank rose three units, to 1,747 basis points around 2000 GMT, compared to a record level of 1,753 units noted the day before.

* OTC bonds fell 0.2% on average due to persistent portfolio disarmaments due to short- and medium-term financial concerns despite attractive returns. In the week they yielded 1.2% as a whole.

(Report by Jorge Otaola; With the collaboration of Hernán Nessi; Edited by Walter Bianchi)

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