LOCAL STRATEGY
Following Lecaps and Letes maturities extensions, and FX controls, domestic securities slumped reflecting significantly weaker economic conditions. We suggest reducing exposure to argentine banks, however they trade at book value, an indication of the severe sell off, and utility companies, due to higher regulatory risk and possible tariff freezing. Companies with a high percentage of dollar denominated revenues, lower operating exposure to domestic market and low debt levels would act as a hedge in the current scenario.
Uncertainty about debt repayment and possible restructuring triggered significant cash outflows, reducing exposure to Argentine securities. We suggest reducing or eliminating exposure to companies operating in sectors that may suffer tariff freezes, while banks would suffer most due to the short term debt restructuring and FX controls. We favor defensive stocks such as Aluar, Ternium and San Miguel, also migrating to CEDEARS with limited exposure to Argentina, such as MercadoLibre and Globant. Corporación América Airports (CAAP) also stands out due to its reduced exposure to local macroeconomic risk, and high percentage of dollar denominated revenue.
Highlights
- The Merval Index hiked 3,74% during the last 7 days, in line with international markets.
- Companies in the Electric sector were the best weekly performers.
- Oil & Gas was the worst performing sector.