How the market reacted to the first measures of the Milei Government

Analysts highlight the reduction of the gap and exchange rate stability as positive signs that reflect the credibility of the fiscal signal

The package of measures announced by Luis Caputo was very well received by the market and one of the indicators that reflect this is the reduction of the exchange gap as a result of the fall of parallel dollars.

This Thursday, the blue dollar fell another 7% and is trading at $995, while the CCL operates at $1,005 and the MEP at $1,021. “We are seeing a very important gap narrowing. It is a clear sign that the market believes what the government is doing. I see the behavior of shares and ADRs with some correction as reasonable because it was already priced, but the path is still bullish,” analyst Rubén Ullúa told Forbes.

For Santiago Ruiz Guiñazú, Head of Equity, Sales & Trading of the Adcap financial group, “it gives the impression that the market is giving a vote of confidence to the new administration” and that “it is seeing that pragmatism at this moment is essential ”. “Among the sectors that reacted best are the banks, then the oil companies and we see some lag in the generators and public service companies. We believe that there is a need to provide more precision regarding the sequentiality and magnitude of future rate increases. In the banking sector we would like to understand more what regulations are going to continue from the previous administration and which ones are going to change,” he added.

Regarding the next signs to strengthen the path of the program, Miguel Sinigaglia, president of Conetxia, says that “it is very important to see how the social situation is contained in the next 30 to 60 days”, see the support of the United States and international organizations and see if they can obtain financing for between 15,000 or 20,000 million in the short term.

Another aspect highlighted by Sinigaglia where Leonardo Chialva, partner at Delphos Investment, agrees is the importance of subscribing to the Central Bank bond for importers. “It is key to dismantle the Leliqs and with that continue burning pesos from the economy,” he maintains.

From a macroeconomic analysis, the director of the DNI consulting firm, Marcelo Elizondo, affirms that the objective is to achieve budget balance in the second semester, but that the transition until March will be very hard. According to his vision, the three most important challenges in the short term will be management capacity, political negotiation and street reaction.

“We are going into a year of economic contraction (between 3 and 4%), but much worse in the first semester. There will be high inflation in the first months (December is already more than 7% in the first week) and the crawling peg will have to be more aggressive than announced,” he indicated.

Regarding this last aspect, where Caputo leaked that the devaluation would be 2% monthly against an inflation that is expected to be much higher, there are analysts who say that the international context could play in its favor.

“With the dollar and interest rates falling in the world, it is feasible that we will have appreciations in the currencies of our direct competitors and, therefore, this would provide a cushion for the 2% corrections to be sufficient,” says Ullúa.