The valuation of bank stocks suffered a sharp nosedive affecting the Argentine financial system. And it is not just the banks, but the whole Stock Exchange. Since the start of the year, there's been a landslide that has come to exceed 70%.
The Galicia Group was valued at almost USD 4.3 billion before the primaries and now it is worth roughly USD 1.310 million and it's the biggest drop within the stock market. A price drop of 74.9%. Supervielle's decline was 70.1% and Macro's, 71.4%. This means losing an average of two-thirds of their valuation in a short period. Setting aside the analysis before the elections which inflated the Merval by 9%, the debacle doesn't reflect a noticeable change in magnitude. So far this year, the three banks -Galicia, Supervielle, and Macro- dropped, 65.3%, 73.6%, and 50.5% respectively.
Even greater were the losses recorded in the energy sector. Edenor collapsed 79.8%, Pampa Energía, 61.6%, and Central Puerto, 70.8%. YPF, which had a good performance during the first two quarters of the year, dropped 39.3% since January, but it has been adding losses since the primaries. A 75% collapse. Since May 29, when Argentina ceased to be a frontier market, these losses have significant growth. Returning to the MSCI index of emerging markets had not the expected effect: YPF joined the index on July 16 and since then hast lost 52.7% and its shares are now at a record low, priced at USD 8.13 on the New York Stock Exchange. Much lower than the USD 10.5 it was worth in 2001. Alberto Fernández warned about this on his twitter account on Wednesday.
The 11.7% drop on this recent new Black Tuesday ratified that nothing has a price anymore, in the market there's a dissolution of assets which has effectively liquidated savings of a chunk of the population and this will result in a decreasing buying capacity, which in turn will affect companies' growth and consumers' ability to reactivate expenditure.
Financial analyst Francisco Uriburu told LPO: "To measure the existing stock market debacle in a nutshell, let's just say that if Galperín should sell MercadoLibre and buy the entire Stock Exchange, which today is worth 21,000 million, he'd have 8,000 million left over, this considering his company is rather small-scale compared to others listed on Nasdaq. This should give you an idea of how much the Argentine economy has shrunk. There are already estimates that this month there was a 10% drop."
"A similar stock market liquidation has not been seen since 1992" Uriburu pointed out "And it is not about the primaries. Actually, there is not a just single cause that can generate a similar debacle. It's a snowball; the elections, the retiring of Funds, plus the fear of returning to frontier [market status], also the interest rate affecting companies' results, add to this a lack of cash flow, plus the precautions for $50,000 million that were lost after it was impossible to renew them, and the funds of shares run with fear of having the same fate as those reached by Lacunza's announcements. Also, S&P's watchlist used to lower ratings on Mortgage, Provincia, Galicia, and Patagonia banks."
Javier Alvaredo, economist and director of ACM consulting firm, said: "Uncertainty has recently increased. I can't remember a minister who publicly announced he was going to send a law to Congress and six days later he still hadn't followed through. I don't think there'll be an agreement with the opposition and the default signals do not help at all. Maybe, if they had announced these measures last Sunday, Lacunza's announcements on Wednesday wouldn't have been necessary. And yet, they still won't share any details. It's understood that according to Lacunza, payments will be honored, but on September 8, USD 400 million will expire on the Bonar 2024 bond and it is still unknown if they are going to pay. This is not soothing, either."
"Everyone's keen to sell but there's no one on the other side willing to buy" adds Alvaredo. "Those with assets want to convert them into pesos whereas those with pesos want to exchange them to dollars since the market awaits for a sign of the opposition: "Let's go for it, but faster" and I don't think that's bound to happen. Also, after Sunday's announcement, the price of the future dollar dropped and those with hedges now will have to bring in further guarantees and to do it, they need to sell shares. And they'll keep on dropping." On this point, Uriburu agreed: "This is a one-way market, and no one has the resources or gumption to enter. Both funds and investors have lost their assets and this will have a real effect because the loss in purchasing power will disastrously reinforce a drop in purchasing power. While banks have experienced a steep rise in the cost of funding, Leliqs [Letters of Liquidity issued by the Central Bank tendered on a daily basis for a 5-day payment and can only be acquired by banks.] today are a high risk for them since they have invested in them and at some point the government will cash on the Leliqs. Thus, banks will rather divest in order to achieve a cash cushion for the foreseeable future."
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