Argentina’s Peronist Election Win Eases Market Concerns
A Surprising Outcome
In a surprising turn of events, Argentina’s ruling Peronists secured a first-place victory in the recent general election. This outcome has calmed market fears of a runaway win for libertarian radical Javier Milei, who had promised to dollarize the economy and close the central bank.
Analysts Optimistic
Economy Minister Sergio Massa, a Peronist, garnered approximately 36.5% of the vote, surpassing pre-election polls and setting up a polarized run-off against right-wing outsider Milei, who received just over 30%. Analysts believe that this result will alleviate concerns of a sudden devaluation of the local peso currency and reduce the likelihood of Argentina abandoning the peso in the near future, as the eventual winner is expected to have a weak mandate.
Market Reactions
Market analyst Salvador Vielli states, “It seems to me that it can alleviate the flight to dollars.” He further adds, “Many assets had begun to price in a disorderly dollarization, so the dollar could ease a bit.” While there may be some intervention in the bond market, Vielli does not anticipate any significant movements.
The peso currency has experienced volatility leading up to the election, with the dollar trading near 1,000 pesos in popular parallel markets. Argentines have limited access to greenbacks at the tightly controlled official rate of 350 pesos. Bonds have also been slipping, while the stock market, considered a relative safe haven for local investors, has been jittery.
Impact on the Economy
Argentina is currently facing its worst economic crisis in two decades, with triple-digit inflation, a mounting cost of living crisis, increasing debts, and an impending recession following a painful drought. Despite the outcome of the election, a local market operator believes that there will not be a significant market slide on Monday, stating, “I don’t think Massa’s victory will trigger a sell-off of the few remaining holders of Argentine assets.”
Reduced Uncertainty
The result of the election means that mainstream conservative Patricia Bullrich, the establishment candidate favored by businesses, is no longer in the race. Instead, a close battle between Massa and Milei awaits. While uncertainty remains due to the lack of a clear majority, analysts believe that the market’s fear of radical policy shifts has been reduced.
Market Outlook
Sebastián Azumendi of Adcap suggests that the market will initially open downwards but anticipates a floor where demand will emerge. Investors were particularly concerned about Milei’s victory, and Azumendi believes that this outcome is less alarming.
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