2024-09-16 19:19:09
Argentine stocks and sovereign bonds registered strong gains this Monday after the presentation of the 2025 Budget by the president Javier Milei in Congress. The ADRs of Banco Supervielle, Banco Macro and Edenor led the gains, and the Merval index grew by 1.8%. At the same time, the country risk fell to 1,379 points, marking its lowest level since June.
The budget project presented establishes fiscal austerity as its core, with a GDP growth projection of 5% and an estimated exchange rate of $1,207 per dollar by December 2025. However, financial analysts raise questions about the viability of these numbers.
Optimism in the markets
Milei’s speech, focused on fiscal balance and reduced public spending, generated an increase in confidence in the markets, particularly in Argentine assets. Eric Paniagua, from Epyca, highlighted that the government’s firm stance on fiscal balance could revitalize the perception of foreign investors. However, doubts persist on key unaddressed issues, such as exchange control and international reserves.
Concerns and optimism
Andres Reschinifrom F2 Financial Solutions, told Perfil.com that, in light of the day’s operations, the market’s reading was positive. “The government put into numbers what it has been doing up to now and, a priori, there does not seem to be any sudden change in the document,” he said, although he was cautious in saying that the government must give the market more tools. “There are still doubts to be cleared up and more clarifications are probably needed,” he said.
Something similar was said Nicolás Olivé Duran de Rudolph who agreed with his colleagues in their assessments. “The market took the presentation of the 2025 budget well, we can see this in different sectors of the market: Dollar bonds rising 1.55% on average, rofex futures falling 0.75% on average, and firm treasury bills rising slightly (lowering the rate) and the Merval index rising 1%,” he said.
For the financial analyst, the market “believed” the libertarian government and this was reflected above all in the dollar futures quote on the Rofex market, and in the price of the CCL/MEP.
“We continue to see investment in sovereign bonds as positive, given the price they are at and because the 2025 maturities do not seem to present a challenge for the government, while the key to the macroeconomic situation is the sustained fiscal surplus,” he said.
He added that even in the worst-case scenario, “default or restructuring, there are dollar bonds that offer good coverage and return ratios. “Another issue is the bonds of the province of Buenos Aires, which, although they offer very attractive returns, are in the eye of the storm, with serious doubts about their payment,” said the Ruolph analyst and added, “Until now, Kicillof has always paid the bonds, but it is a latent risk that the investor must know how to quantify.”
Finally, Ayelén Romero, from Rava Bursátil, returned to the importance of protecting the fiscal balance. “It played a key role and could be an important driver, together with market optimism, to achieve a bullish day on the Buenos Aires stock exchange. Since the beginning of the day, both stocks and sovereign bonds responded with increases of around 1% and 3%,” she argued.
On the other hand, the analyst referred to the value of the dollar as the government expects an exchange rate for December 2024 close to $1,100 and $1,200 for December 2025. “This point impacts on related assets, both in Rofex and dollar-linked bonds, which from the beginning of the round until now have been showing downward quotes. In particular, if a sustained decline occurs, there could be an opportunity to enter the TV25 dollar-linked bond due to a price mismatch,” said the analyst. Christian Buteler was more critical, pointing out that, although the fiscal surplus is positive, it is still in pesos, while the country faces important foreign currency maturities. The lack of clarity on how reserves and inflation will be managed worries experts. Projected inflation for 2025 is 18.3%, a significant reduction from the 104.4% estimated for 2024, but considered optimistic by many economists.
Impact on international markets
On Wall Street, Argentine stocks also posted a positive performance, although global markets were generally mixed due to uncertainty over the US Federal Reserve’s upcoming interest rate decision. Meanwhile, financial dollars, such as the MEP dollar, continued their downward trend, with the gap with the official exchange rate narrowing to less than 30%.