Confidence, another low value in the markets
Super Wednesday, but black. The plunge suffered yesterday by the shares, accompanied by another retreat of the debt bonds – which took the country risk to levels of the K-era – reflected the difficulties that investors here and abroad have in regaining confidence in the proposal. Economy of the government of Mauricio Macri. A proposal that, hit by the exchange crisis at the end of April, seemed somewhat reinforced by two shocking news: the agreement with the IMF for a much larger amount than expected, and the recategorization of the emerging market. Both news were known last week. It seems they happened a long time ago.
The prices of the shares reflect that there are first line companies that today are worth, in dollars, 55% less than a year ago. A top bank, which had a market value of US $ 9,000 million on the day that Cambiemos won the elections of October 2017, today is worth US $ 4,000 million.
There are bonds that fell 20% so far this year and to yield less than 7% today yield more than 9%.
The loss of value in these six months is impressive, no matter where you look. Along with the loss of confidence.
There is some mitigation: this collapse occurs in a very complicated context for Argentina. This year the grain harvest reduced 8,000 million to economic activity due to the severe drought. The world in general is complicated by commercial wars, rising interest rates in the United States and, as mentioned above, a change of scenery that particularly punishes emerging markets, and among them Argentina, in the list of more vulnerable due to the dependency that the gradualism of external financing has.
In this challenging context, the government has to find the formula to move forward with the adjustment and not jeopardize its electoral chances of 2019. These prices are perhaps telling how investors see the dilemma that Cambiemos faces today.
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