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Argentina Market Analysts Find Optimism Amid Peronist Victory: A Thin Silver Lining

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While the Peronist election win in Argentina may initially raise concerns for market analysts, there is a glimmer of hope as it presents an opportunity for economic reforms and stability in the long run.

Argentina’s presidential candidate Sergio Massa addressed his supporters after the surprising first round results of the presidential election on October 22, 2023. Massa, representing the ruling Peronists, won around 36.7% of the vote, surpassing pre-election polls and setting up a polarized run-off vote on November 19. This unexpected outcome could temper market fears about a potential win for libertarian radical Javier Milei, who has promised to dollarize the economy and shut down the central bank.

Analysts believe that Massa’s victory reduces the likelihood of a sudden devaluation of the local peso currency and diminishes the chances of Argentina abandoning the peso in the near future. However, it does not provide a solution to the country’s economic problems, including triple-digit inflation, mounting debts, and an impending recession due to a severe drought.

While bonds have been slipping recently due to election uncertainty, the market impact of Massa’s win is expected to be limited. The peso has been volatile, with the dollar trading at almost 1,000 pesos in parallel markets. The election results could ease the flight to dollars and stabilize the currency to some extent.

The unexpected outcome also means that conservative candidate Patricia Bullrich, favored by the business community, is no longer in the race. The battle now lies between Massa and Milei. Analysts suggest that the market’s reaction is negative due to the elimination of Bullrich and the continued uncertainty caused by the lack of a clear majority. The market had been jittery, but Massa’s victory reduces the chances of radical policy shifts, which investors had been concerned about.

Overall, while the market is expected to open downwards, analysts believe there will be a floor of demand. The speeches, political alignments, and economic measures of the candidates in the run-off vote will likely shape market sentiment in the coming weeks.

In conclusion, Massa’s unexpected first-place win in the first round of the presidential election has tempered market fears of a radical policy shift. However, uncertainty remains as the country grapples with economic challenges, and the run-off vote on November 19 will determine the next president of Argentina.

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