Argentine stocks and bonds fall further: why and what is now the market's forecast

According to Warren Buffett, whoever wishes to invest his money in the capital market has to answer himself the following question: are you willing to lose up to 50% of your money? Although that percentage seems to be exaggeratedly high, what is happening with Argentine paper, whether bonds or stocks, is already a sad reality that corresponds to the phrase of the renowned investor.

Such is the case of Mercado Libre, which has fallen 48% so far this year, closely followed by Globant with 39%. One step lower are Grupo Supervielle (30%), Loma Negra (24%) and Grupo Galicia, with 22%.

On the bond side, the most punished bonds are, practically in the same line, the Global 29 and 30, which together with AL29 and AL30 show setbacks ranging from 32 to 35 percent.

It is worth noting that a good part of these corrections were recorded throughout June, which makes the country risk continue to climb, reaching 2,277 basis points, which implies that a new record was reached in the post-debt restructuring era of 2020.

Why stocks and bonds fall

According to analyst Gustvo Ber, “local assets have been acting as hostages of the external climate, although this is accentuated because the domestic context is far from being able to transmit calm”. And he adds: “All this, in the midst of growing tensions within the ruling coalition that only make it more difficult to manage the economic challenges”.

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This view is shared by the analysts of Portfolio Personal Inversiones (PPI), as they maintain that “the long rates abroad, with the US 10-year rate exceeding 3% and the strength of the US dollar index, hurt the entire emerging debt universe and the region’s bonds”.

From the point of view of the local financial market, the reasons for this situation are diverse, but among them we can mention the Central Bank ‘s difficulty to obtain foreign currency, which was even greater this Thursday, when it had to sell u$s170 million.

This is in addition to the complicated situation that the peso debt market is going through, after the exchange that took place on Wednesday with the intention of decompressing the heavy maturities of peso debt to be faced next week. Originally, $605,000 million were due on Tuesday 29, an operation that put pressure on the public accounts, because most of the papers involved are inflation-adjusted.

Government swap: this is how the market responded

Although sources from the Ministry of Economy were confident that the swap would send a strong message to the market that, despite the uncertainty, the Government would comply with its obligations, the immediate reaction was negative: peso bonds closed the trading session with drops of up to 5%, as in the case of TX26.

On the other hand, dollar-denominated securities also showed their worst side, as the AL29 lost 2.5%, while the Global 35 dropped another 2.9%. Meanwhile, Argentine stocks on Wall Street fell up to 6.5%, led by YPF, while Central Puerto fell 6% and Tenaris fell another 4.8%.

Locally, the S&P Merval index fell 2.9%, with the largest declines being those of YPF (7.8%), Transportadora de Gas del Norte (6%) and Cresud, with 4.5%.

Argentine bonds and stocks: will they improve their performance?

With the new drops this Thursday, sovereign bonds show yields that place them among the riskiest in the world. To make matters worse, with a clear upward trend, since they quadrupled since September 2020, the month in which the Government carried out the debt swap. Since then, Argentina’s country risk has doubled.

“If we analyze the yields of the different bonds, which in the case of AL29 and AL30 exceed 40%, we conclude that they reflect the market’s absolute lack of confidence”, says analyst Agustín Cramo. And he adds: “Although in the short term there are no significant maturities for most of them, investors’ concern that at some point we are in the presence of a new credit event is palpable”.

On the other hand, Balanz analysts consider that the possibility of bonds improving their performance does not seem to be immediate, since “until there is a stabilization of inflation in developed countries that helps to improve global risk appetite, the pressure on local assets will hardly dissipate”.