May 15, 2022 4:26 pm

IMF: analysts project a moderation in the markets while waiting to know the details of the agreement

The announcement of the principle of agreement between Argentina and the International Monetary Fund (IMF) had an immediate effect on the financial markets on Friday, with the drop of 10 pesos in the informal exchange rate and the fall of 3.4% (65 units) in the country risk. However, as the day wore on, The initial euphoria moderated, as doubts began to emerge about how the agreed goals would be reached. For the beginning of this week, it is expected that moderation will continue to prevail, waiting for the Government presents the fine print of the understanding.

The certainty that Argentina will advance in an agreement with the IMF was received with good eyes in the market. Although the base scenario of all the consultants was that an agreement was going to be reached, until last Thursday there were doubts about whether the government was going to negotiate in default or not, since US$718 million were due and there were no clear signs of whether it was going to be paid.

“The announcements made by the Government and the IMF with the advances in their understanding in the face of an agreement have a main virtue: limit the uncertainty about the possibility of extreme scenarios in the short term derived from a default which, with the highest probability, would have become prolonged”, says the latest Consultatio report.

“We understand that exchange rate pressures may subside in the short term, but that the underlying trend will depend on the fate of the negotiations in the coming weeks and of the evolution of the patrimonial situation of the BCRA”, said, for its part, the panorama of Invest in the Stock Exchange (IEB).

The US$80 million sale of the central bank last Friday to contain the demand for foreign currency again generated alarm in the market, despite the announcement by the Minister of Economy, Martin Guzman. In the month, the entity that leads Miguel Pesce accumulates a red of US$125 million for his interventions, a substantial difference with the US$783 million that he had bought in the same month of 2020.

On Tuesday, Argentina has to face another maturity with the IMF for US$368 million in terms of interest. and in 50 days the Fund must be paid US$2.82 billion, but there are no dollars to face that expiration (the Central Bank’s freely available reserves are around US$1 billion). Guzmán trusts that, by March 21, the new agreement with the IMF will be approved in Congress and in the agency’s board, which will allow the arrival of new fresh funds.

Gustavo Quintana, exchange operator in PR, he does not believe that tomorrow there will be many news regarding what happened last Friday. “At the opening of the market on Friday, the announcements were already known and over the weekend there were not many clarifications or specific details of how the objectives that are in the agreement are going to be met. The market will operate with some caution, prices will probably go down a bit, but I don’t know if the exchange tension will disappear completely or if there will be a euphoria in the markets. Anyway, Monday is the end of the month and there are closing positions and there will be demand for foreign exchange to meet that. I don’t think the situation is going to change much,” said the analyst.

“The great reaction of the market has already occurred and it was positive, with an increase in the parities of bonds in dollars, with a drop in the implicit dollar and a rise in Argentine stocks. I think there was a moderation almost closing the wheel and there were great doubts about how to achieve those objectives that were raised with the IMF”, dice Gustavo Neffa, director de Research for Traders.

“I think the positive position for stocks will continue. The bonds have a little more parity to recover, but little in the short term, if not new announcements appear. To the I don’t see the exchange rate going down much more. I see the market stabilized at a level wanting to adjust a little down, but without triggering, waiting for more news, which will be the memorandum of understanding, “he added.

Analyst Salvador Di Stéfano, for his part, points out that the “opening of tomorrow’s market will be very positive because the details of the agreement are becoming known and that suggests that Argentina has managed to solve its financial problems”.

“Although, on the side of the real economy, dollars are still lacking to function, with which I believe that in the year we are going to have a rise in the official dollar to a level similar to or greater than inflation, from the financial point of view we have very unfair bonuses. This misarbitration will be corrected and we see in a first stage a large rise in bonds in dollars, accompanied by a drop in country risk and a consequent rise in shares,” he said.

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