Stocks: after strong upturn in dollars, Merval rise may continue in 2023

The S&P Merval index accumulated gains of 42% in currencies throughout 2022. Analysts say the keys for this year will be the international context, the macroeconomic course and the electoral climate.

Argentine stocks managed to consolidate their recovery and produce all-time profits in 2022. The S&P Merval index accumulated an increase of 42% in dollars through the year. This happened despite the prevailing volatility on Wall Street, as global equity assets were affected by the US Federal Reserve’s harder grip. Yet Argentine shares bucked the trend of the rest of the world. They had been severely punished for four years, with prices at low levels, which made the starting point of local assets much lower when compared internationally, so certain improvements in macroeconomic terms resulted in important upturns.

Looking ahead to 2023, analysts point out that the rally has room to continue. Yet they stress that this will depend, on the one hand, on the international scenario and, on the other, on the government’s ability to successfully control variables such as central bank reserves, the financing of the debt market in pesos and the exchange market, in a year in which the election will set the pulse.

Economist Federico Glustein noted: “2023 will probably be a year where the result of the stocks will be mixed. We can appreciate two sectors that will surely grow, energy and technology, and also add finance and those connected to public works, but to a lesser extent and with lower income. Apart from that, the outlook is not so clear due to potential macroeconomic events: whether growth continues or slows down, inflation eases or continues at around 90%, what will happen with quasi-fiscal issues and bonds in 2023, will the market trust or look for safeguard against the upcoming presidential elections? The electoral landscape is going to absolutely change the market, in both previous and coming days, but prior expectations will play a key role”.

This way, Glustein considered that “in general terms, the rising rally will continue in the first months of 2023 but will be limited by the lack of dollars due to the advanced proceeds from grain sales and the drought, as well as by the political scenario and the possibility of economic stagnation, both in our country and abroad”.

Juan Pablo Irrazábal, from Bull Market Brokers, highlighted: “I am convinced that 2023 will be a great year for the Argentine market. On the one hand, the valuations of some Argentine companies are extremely low after the 2019 STEP and the 2020 pandemic, the prices are very low and many people are already taking advantage of that. Even the most exposed sector of the market, the banking sector, has seen increases of up to 50% in dollars from the lowest values left by the pandemic. To recover pre-PASO values, Banco Galicia, for example, should rise 300% in dollars”.

On the other hand, he added: “I think the energy sector, and particularly YPF, is the sector that’s furthest behind, and, therefore, the one with the biggest potential.” He then explained: “on the one hand, if you have depressed prices and repressed inflation, that helps maintain low share prices. Eventually this situation will lead to a liberation of prices due to the unsustainability of the current pricing system, which will allow companies to raise prices, have higher revenues, and increase their value. Central Puerto, Pampa Energía, and the aforementioned YPF are my favorites for next year”.

Likewise, Tomás Villa, from ConoSur Investments, highlighted that it’s reasonable to believe that the rally of Argentine shares will continue next year. This way, in addition to the local drivers, he stressed: “In the international scene, I hope that the downward market for global stocks and bonds finds its bottom, and that then we will also see maximum values of the dollar. 

“If the equity and global bonds began to recover, together with a weakening dollar and strengthening commodities, we could see a ‘tailwind’ scenario taking shape, which would favor the recovery of local equity. I should note that in this scenario I also see new falls in the global market before the bottom I just mentioned, which may correspond to a temporary correction in Argentine shares following the fine increases we saw in 2022”.

Author: Carolina Paparatto / Originally published in / Translated by Agustín Mango


All Right Reserved.  Buenos Aires Herald