Argentina: Main index marks fifth consecutive day of gains and country risk at 2021 lows.

The markets maintain optimism as doubts about a possible debt restructuring are cleared.

The S&P Merval marks its fifth consecutive day of gains this Thursday, March 21st, driven by renewed portfolio purchases in line with positive macroeconomic indicators, amidst political tensions surrounding Javier Milei’s administration. Meanwhile, dollar-denominated bonds rise again, resulting in a further decline in country risk.

In this context, the Buenos Aires stock exchange rises by 1.63% to 1,204,472.16 points, following a 14.14% increase over the previous four sessions, bringing it closer to the record of 1,134,440.11 points set at the beginning of February.

The positive results in the trade balance for February and a fiscal surplus in the first two months of the year boost confidence among financial investors, despite an unemployment rate of 5.7% by the end of the year and a projected 1.6% contraction in GDP for 2023.

On the other hand, Argentine stocks trade mixed on Wall Street, with gains of up to 2%, led by Banco Macro and YPF (1.9%). Declines of up to 1.5% are seen in Edenor and IRSA (-0.8%). The ADRs, therefore, diverge from the positive sentiment on Wall Street after the decision of the United States Federal Reserve (Fed) to keep interest rates stable, which was welcomed by global markets, in line with an expected rate cut by late 2024.

In the fixed-income segment, bonds maintain gains of up to 1.7%, and the country risk remains below $1,500, with a 1.74% decline to 1,472 basis points, the lowest since June 2021.

The main risk for bonds is if fiscal adjustment is not sustained and all fiscal measures are rejected by Congress, leading to primary deficit. If the growth in foreign exchange reserves also fails to reach the expected $12 billion in 2024, the probability of debt restructuring in 2025 increases.