Background on Key Figures and Context
The Buenos Aires Stock Exchange, the S&P Merval, experienced a significant drop of 13.25%, falling to 1,732,923.77 points on Monday. Simultaneously, the Argentine peso depreciated by 4.25% against the US dollar, reaching 1,422.96 units per dollar.
This decline came as a surprise following the libertarian government’s unexpected defeat in the legislative elections of Buenos Aires province, a crucial region representing nearly 40% of the voting population ahead of midterm national elections.
Who is Javier Milei?
Javier Milei is the libertarian president of Argentina, known for his economic reform agenda. His ability to implement these changes has been called into question following the election setback.
Why are these Elections Significant?
These legislative elections in Buenos Aires province, governed by the peronist Axel Kicillof, were considered a litmus test for upcoming October elections. The magnitude of the defeat raised concerns about Milei’s capacity to push through his economic reforms, especially given that a portion of the population lacks basic necessities.
Key Market Movements
- S&P Merval Losses: Notable declines included Grupo Supervielle (-20.32%), Banco Macro (-20.15%), BBVA Argentina (-19.86%), and Grupo Financiero Galicia (-19.42%).
- ADRs Performance: All ADRs of Argentine companies listed on Wall Street, such as BBVA Argentina (-24.41%), Grupo Supervielle (-23.9%), and Grupo Financiero Galicia (-23.5%), experienced substantial drops.
- Mexican Stock Market Impact: Vista Oil & Gas, an Argentine petroleum company operating in the country, saw its shares fall by 8.33% to 656.5 pesos, experiencing the largest intraday decline on the Mexican Stock Exchange.
Expert Analysis and Market Reactions
Morgan Stanley analysts warned that the extent of the ruling party’s defeat increases the likelihood of a negative scenario, with investors questioning Milei’s reform agenda and Argentina’s external financing capacity.
JP Morgan highlighted that the defeat “significantly exceeded expectations,” pointing out that the Argentine peso remains vulnerable to further depreciation.
According to Puente Research, as reported by Infobae, “the market suffered a strong blow in bonds, stocks, and the US dollar. It seems that the government was absent from the spot market but likely sold futures. The dollar reached 2% of the upper band limit before easing towards closing, while bonds fell up to 10% but recovered by midday, closing between 6% and 9% below Friday’s levels.”
Factors Behind Peso Depreciation
Analysts attribute the Argentine peso’s depreciation, which has lost 38.02% of its value year-to-date, to investor doubts about Milei’s monetary and exchange policies, the government’s ability to refinance substantial debt obligations, and the slowing economic activity.
Meanwhile, public debt decreased nearly 4%.
Key Questions and Answers
- Q: Who is Javier Milei? A: Javier Milei is the libertarian president of Argentina, known for his economic reform agenda.
- Q: Why were the Buenos Aires legislative elections significant? A: These elections served as a crucial test for upcoming national midterm elections, signaling the public’s support for Milei’s economic reforms.
- Q: What were the major market movements on Monday? A: The S&P Merval dropped 13.25%, with notable declines in Grupo Supervielle, Banco Macro, BBVA Argentina, and Grupo Financiero Galicia. ADRs of Argentine companies listed on Wall Street also experienced substantial drops, with BBVA Argentina’s ADRs falling by 24.41%.
- Q: What factors contributed to the Argentine peso’s depreciation? A: Investor doubts about Milei’s monetary and exchange policies, the government’s ability to refinance substantial debt obligations, and slowing economic activity are cited as key factors.
