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Montevideo, June 18th 2019 - 16:57 UTC



Investors stunned by Cristina Fernandez political move, but markets finally opted for a cautious calm

Tuesday, May 21st 2019 - 11:01 UTC
Full article 7 comments
Argentina sovereign bonds eked out a gain after an early fall, while the local S&P Merval equities index performed a similar U-turn to close up for the day. Argentina sovereign bonds eked out a gain after an early fall, while the local S&P Merval equities index performed a similar U-turn to close up for the day.

Argentine markets recovered following an early wobble on Monday as investors grappled with the likely impact of a shock twist in the country’s presidential election race after the main populist challenger opted instead to launch a vice presidential bid.

The country’s sovereign bonds eked out a gain after an early fall, while the local S&P Merval equities index performed a similar U-turn to close up for the day. The peso currency pared early losses to close down 0.4%.

A closely watched JPMorgan country risk index also dropped sharply after giving up early gains.

Former president Cristina Fernandez de Kirchner, with an ardent support base but unloved by global investors, surprised locals and international observers on Saturday by saying she would run for vice president alongside former cabinet chief Alberto Fernandez, a veteran political operator who has both backed and criticized her in the past.

Economists said the shock move could add to market uncertainty in the short-term but it should help temper volatility ahead of national elections in October.

“The (political) effect on bonds is hard to read, but we believe the reaction will be between neutral and positive,” said Ezequiel Zambaglione, head of research at the brokerage Balanz, saying the move would cushion Cristina Fernandez’s impact.

The former president would likely still wield much power given the lower profile of her running mate, but being forced to put a more moderate ally above her on the ticket should create a buffer for any more contentious policies.

Investors consider Cristina Fernandez a riskier prospect because of her past populist policies. She introduced currency controls and tax increases on farm exports while in office between 2007 and 2015.

“Taking a CFK (Cristina Fernandez) presidency off the table is likely to be welcomed by investors,” Capital Economists said in a note on Monday, adding it “reduced the odds of a disorderly post-election default,” a risk that had spooked investors.

It could, however, strengthen the challenge against center-right incumbent Mauricio Macri if the Fernandez-Fernandez pair can win over the more moderate wing of the broad Peronist opposition, the consultancy added. The pair are not related.

Government officials hit back at the move, saying Cristina Fernandez would still be the major political force of the pair and the decision revealed her concerns about the polls.

“It could be the sign of weakness,” Andrés Ibarra, deputy chief of staff, told a press briefing on Monday. Many investors, however, remained undecided how the development would play for the election - and markets.

Goldman Sachs said the “unexpected and somewhat dramatic turn of events” was tough to read, though the new candidate was seen as “more moderate and pragmatic, and a less divisive figure” than his running mate. “Overall, it is unclear how this development will change the electoral dynamics.”

Categories: Economy, Politics, Argentina.
Tags: Argentina.

Top Comments

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  • bushpilot

    Enrique, you have lived in “free market” Canada since you were a young teenager.

    Not once in your hundreds of posts here have you ever even implied that you have ever returned to Argentina.

    You are comfortable in “free market” Canada and you won't go near Peronismo Argentina.

    You go on about how terrible “free market” economics is, even though you never left it your whole life.

    And you go on and on about about how wonderful Kirchnerism and Peronismo is, but you won't go near it.

    You haven't spent one second of your life in Peronismo Argentina.

    Printing a ton of money to pay for handouts and government jobs only leads to pain.

    Controlling prices cuts off growth and perpetuates high prices and pain.

    Subsidizing high prices circumvents supply and demand adjustment pains, leading to brutal pain.

    All of which, Enrique, you are in complete support of. While not having lived through any of it.

    May 21st, 2019 - 08:48 pm +2
  • bushpilot

    While staying put in stable, comfortable Canada.

    You think Kirchnerism was the best expression of Peronism?

    Pot banging and all?

    People who lived in the middle of Kirchnerism disliked it enough to take a chance with a non-Peronist candidate.

    Those recent polls you cited didn't show real Argentines as being so enchanted with Kirchner and Kirchnerism either.

    Like I said, you never had to live in it.

    You think Macri is a dis-honest capitalist? You think CFK is honest?

    Was INDEC an example of how honest CFK was?

    Those under-reported figures ripped off bondholders.

    Do you think most Argentines living in Argentina believe CFK is honest?

    Neither you or CFK give any weight to honesty or truth, only to your people being in power. Both you and CFK think that whatever truth supports your side being in power, is “the truth”. Typical Marxist bullshitters spewing bullshit.

    You don't advocate for socialism in Argentina? (more of EM's fork-tongued “honesty”)
    That is a real whopper.

    You have said it a few times that you support “free-market” with a strong state presence.

    That is just word play deception for “socialism”.

    The level of “state presence” that would satisfy you would have very little “free” left in it.

    How many best Peronism, Kirchnerist practices do you think Anibal Fernandez is going to re-introduce?

    More government employment?

    Re-institute gas subsidies?

    Regulate money exchanges?

    Reform INDEC with its CFK era mathematics?

    All of which Macri did away with, but were “best” Peronism economics in your Canadian opinion.

    May 25th, 2019 - 03:05 pm +2
  • :o))

    @Enrique Massot

    REF: Why would they be?

    Easy to see that she is “Testing Water” before jumping in!

    May 26th, 2019 - 03:43 pm +1
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