The local equity comes from closing April with a great bullish boom, in the midst of large macroeconomic fluctuations generated by the lack of stabilization of prices and exchange rates. Specifically, the S&P Merval ended the fourth month of the year at 292,188 units, that is, it had a positive variation of the 18,9%. While. the markets yearn for a new rally of Argentine shareswhich becomes more possible in the face of possible devaluation jumps and a wave of prices that, far from calming down, operates at 130% year-on-year.
May has started with a modest performance of the papers of domestic companies. However, the local stock index shot up 5.5% last Friday and 2.4% this Monday.
It should be noted that the highest returns in April were obtained by Carrier Gas del Norte (TGNO4), which recorded a resounding rise in the 40,2%Followed by Out (ALUA) with a raise of 39,1%while the podium closed it Ternium (TXAR), with growth of 37,4%. These shares showed strength, despite the political and economic noise, beating the rise of the dollar cash with liquidation (CCL) which, in this same period, grew 12.3%.
What will inflation be like in the coming months?
The estimate of the general price rise has risen notably, according to the Survey of Market Expectations (REM) for April, published by the BCRA, which incorporated a higher nominal value based on the surprise inflation data for March of 7.7% versus the 7% projected, and before the escalation of financial dollars as of April 19.
The top 10 analysts consulted by the monetary authority expect a strong increase in inflation for the coming months, with April standing out at 7.3% and May at 7.5%. They are significant increases in relation to the 6.2% and 6.1% indicated in the previous report. Meanwhile, it is worrying that from the date up to October they do not estimate any monthly statistics below 6.8%.
In this sense, from the PPI Research team they maintain that “the market’s inflation expectations, although they continue to be unanchored month by month, do not manage to capture the speed of events or, rather, have an optimistic bias that cannot be validated in fact. Regimes of high volatility in prices, with their peaks and valleys, usually have an upward path until they come across a comprehensive stabilization plan.”
In addition, they realize that in the coming months it would be unlikely and drop in inflation. “In economic terms, the financial needs of the treasury, which would exceed 5% of GDP, and the great speed of money circulation, give an indication to infer that prices will continue to accelerate in the face of a much more diffuse electoral panorama than it looked just two years ago. months,” they warn.
Does the purchase of local shares increase in inflationary months?
When reviewing the inflation data in retrospect, until the beginning of 2022, in comparison with the Merval trend, it can be noted that both, in a few months, exploded upwards. This was the case in July 2022, when the CPI showed a monthly 7.4% and the Merval accelerated 38.53%. Something similar happened in January of this year, since inflation reached a variation of 0.9 percentage points and domestic shares climbed 25.4%.
Merval and Inflation
In the outgoing month, the local index grew by a large proportion, while inflation is also estimated to exceed all benchmarks this year. This coincidence could favor that an investing public with great needs to protect their pesos, strongly “cepadados”, from turning to the local equity market.
What are the assets with the greatest upside potential?
The leading S&P Merval index gained 2.44% this Tuesday, to 304,395.94 pointsafter giving up 0.3% last week and marking a historical high of 307,057.03 units in late April, partially aided by rumors of a deal between the national government and the International Monetary Fund (IMF).
In this way, the papers that most cooperated to extend the bullish streak, within the leading panel, were: Ternium (+7,1%), Out (+6,8%), y Banco Supervielle (+6,2%).
However, when measuring the Merval in dollars, it is close to the u$s664well below the u$s970 in which it was listed prior to the PASO of 2019 or of the u$s1800 beginning of 2018. And when analyzing the behavior so far this year, it is verified that the value of the indicator continues in stable values Despite the shocks that have occurred in the exchange market, for which reason the upside boom could continue.
Even more so if a change of regime is contemplated, with new perspectives that reduce the country risk, having repercussions on better valuations of companies in the domestic market.
Regarding the advance of the Merval, Alexis Annarattone, operator of LDT Bokers, stresses that “although it is difficult to measure, the expectation related to the elections would be pulling the market. Rumors of a change in the political cycle encourage investors.”
For its part, it also highlights that “clearly, variable income is acting as a hedge against the depreciation of the peso.”
Which companies do experts recommend following?
Lisandro Meroi, a Market Analyst at TSA Bursátil, comments that Taking the Merval in dollars as a reference, “a strong recovery has been observed since the middle of last year when Massa took over as head of the Economy”.
The expert comments on a possible upside of +45% in the event that the “electoral trade” returns the Argentine stock index to the values prior to the mid-term elections of the Mauricio Macri administration.
YPF diversifies its business in Vaca Muerta
“We believe that there are opportunities in some companies such as Pampa Energía (PAMP) or YPF (YPFD) in the energy sector,” he says.
by the side of YPFflagship company of the Argentine energy sector, is a company that is diversifying in the industry, in Vaca Muerta, with its strong position with potential business in the lithium, gas or other derivatives industryas an agricultural sector.
Another fact that makes the company stronger is the recent news that the courts in Delaware, USA. They agreed that the oil company should pay only 2% of the initial demand, which amounted to u$s14,000 million. Thus, the company will continue to expand and will once again export crude oil to the North country after 17 years.
Pampa Energy, grows steadily in its gas production, up to all-time highs. The company continues to expand, signing an agreement on May 5, 2023 for the acquisition of Repsol’s stake in the Heavy Crude Oil Pipeline (OCP).
