Collecting in dollars and staying in dollars

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Savers collecting $800 millions for annual payment of GDP coupon have opted for not reinvesting such amount. They have kept those funds outside stocks, bonds and time deposits. Foreign context does not push them to make risky bets, less in Argentina. Yesterday, even the head of the Bank of England told in advance that bad news were not over. A sense of uneasiness reigns in Wall Street: banks are trimming their staff and nobody can perceive the end of crisis. Investing in Argentina within this context? No-one at sight.

Argentine market continues without being able to raise its head. Yesterday, Merval index ended with a slight loss (only 0.07 per cent) and scored its sixth consecutive fall. Neither did bonds improve and Central Bank (BCRA, in its Spanish acronym) had to sell dollars again (though a few), causing dollar quote to lower in wholesale foreign exchange market.

Probably the most important piece of information of Tuesday's session was the fact that the $800 millions collected by GDP-coupon holders between Monday and Tuesday have not returned to market yet. "Those receiving dollars kept them and many collecting in pesos also preferred to move to dollars. In this context, nobody wants to return to market," the manager of an Argentine stockbroker company signalled.

Traders hoped for a possible ebb towards domestic assets after annual payment of GDP coupon. However, for the time being, such movement has not taken place. On the contrary, investors have opted for being cautious. Moreover, more than half of funds were paid in foreign lands, without noting a return of those capitals. Merval index, embracing leading stocks, ended yesterday at 2,125.67 points. So far 2007, it has accumulated an only 1.70-per cent rise in pesos. However, if make the estimate in dollars, it's almost neutral or even with a slight loss. We are talking about the Latin American market posting the worst performance. San Pablo Stock Exchange, for example, has already climbed more than 36 per cent in reals, rising to 50 per cent if measured in dollars (due to revaluation of domestic currency).

All the same, traders believe that there are opportunities at these prices, naming a number of companies: Molinos, Tenaris, Siderar and Aluar, all with handsome profits and promising outlook for 2008.

Values


Meanwhile, neither do banks curb stock exchange low. In this case, they are affected by sovereign bonds' weakness, which hits balance sheet's profitability. For the time being, they are not among market's favourites. Yet, they show appealing values.

In bond market, trading was poor and foreign investors' interest was almost null. Slight rise of country-risk index mirrored this: the gap between Argentine bonds and Us Treasury's made a short leap to 405 basis points (4.05 per cent annual).

In the same sense, default risk received by investors for Argentina also increased. The well-known Credit Default Swap (CDS) for a five-year term climbed yesterday 3.6 per cent to 463 points. This means that those subscribing for it pay a 4.63-per cent annual premium out of bond value so as to recover total investment if the country falls again in suspension of payments.

Some series in pesos were severely punished, like Par, which plummeted almost 2 per cent. Discount in domestic currency, the one trading the most, managed to rally slightly by closing with a 0.43-per cent rise to ARG$116.75. However, the electronic market continued trading down, with a higher than 1 per cent loss.

Another important piece of information Tuesday's session left was dollar fall in wholesale market, moving from ARG$3.142 to ARG$3.136. BCRA had to sell dollars, though a few, for the American currency to decrease slightly. The economic team states that there's no interest in "setting" dollar value some cents above those levels so as to close the year in a better manner, particularly as far as BCRA's balance sheet is concerned.

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