Argentine markets collapse due to electoral results that do not clear up doubts

Its markets of bonuses and actions of Argentina sank this Monday in an adverse reaction to a result of the presidential elections this Sunday that forces a holding of a second round of elections on November 19extending the strong uncertainty that dominates investors regarding the future of the second largest South American economy.

In the exchange markets, the reaction has been uneven, but equally eloquent of the volatility that prevails in Argentina’s financial circles while awaiting a definition on who will lead the country from December 10.

Nobody expected that the Minister of Economy and official presidential candidate, Sergio Massa, would win the most votes this Sunday, with the 36.6% of the votes.

Neither did the market, which until the end of last week almost took for granted a victory in the first round of the libertarian candidate Javier Milei, who finally obtained a 29.9% and will face Massa in the second round in November.

“Volatility will last for another month, because there will finally be a runoff that the market did not have in prices. The market had placed its bet, especially on Friday, on a winning Milei”commented Soledad López, from the firm Rava Bursátil.

Argentine sovereign bonds sank this Monday 7% average in their prices in dollars and the S&P Merval index of the leading shares of the Buenos Aires Stock Exchange plummeted 12.3%.

A surprising result

According to the economist Gustavo Ber, the “The surprising result of the elections extends the uncertainty” now on the way to the second round, a stage that investors will go through “with a still cautious and volatile tone.”

A focus of attention will be the behavior of the exchange markets, with a Central Bank that promises to maintain the official exchange rate, but whose level of reserves is critical.

This Monday, the value of the US dollar in the informal market closed at 1,100 pesos per unit, almost triple the official price to which almost no one has access, while the main reference of the so-called financial dollars collapsed, even at values ​​a 171% higher than the official value, because Sunday’s result no longer makes it so clear that Argentina will dollarize the economy as Milei proposes.

In addition, Massa’s management will likely seek to calm exchange tensions, at least until the second round.

Massa signal to the markets

Massa, in fact, insisted this Monday, in a meeting with the international press in which EFE participated, to send positive signals to the markets, not only to go through the coming weeks with serenity, but with a view to generating certainty with a view to his eventual Government, in which he promises to organize the Argentine economy, plagued by deep imbalances.

“What the world expects from Argentina is balance, rationality, common sense. What he hopes for is temperance. What you expect is predictability.”stated Massa, who assured that Argentina will grow again in 2024.

He “shock” of confidence that Massa seeks to impress is precisely what the rating agency DBRS Morningstar said this Monday that the next Argentine Administration will need to get an economy that is in crisis out of the crisis. “at the edge of the abyss”.

“If Massa or Milei can build a lasting coalition that quickly provides support for a comprehensive stabilization plan, Argentina could emerge from a crisis,” said Michael Heydt, senior vice president of Global Sovereign Ratings at DBRS Morningstar.

Otherwise, Heydt warned, “The outlook will likely be characterized by soaring inflation, a deep economic recession and political uncertainty.”