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"STEP Risks" grew: the market underestimated the possibility of Kirchnerism's return

A survey among major portfolio managers and Wall Street fund analysts and banks conducted by Poliarquía, under direction Alejandro Catterberg, he said that the formula Macri-Pichetto is a favorite. More than 50 experts who were consulted thought that they provided an opportunity to win 65% on the official formula. In addition, they believe that Kirchnerism will win STEP for a difference of three points, small enough to allow the Government to hand it over later.

Outside the survey, Some analysts even consider that the current price of Argentine assets reflects a greater opportunity to be re-elected. Based on the current stock price level and country risk, the Government will be given the opportunity to win 70% compared to only 30% for the Fernández-Fernández formula.

But is the opportunity for victory for the ruling party really great? There is currently no single survey that makes it possible to conclude that the Government is indeed preferred in elections. On the contrary. Even the most famous figures so far indicate that Macri will win only in voting and only with a difference in points over Alberto Fernandez.

The picture looks more complicated. The survey which gave Macri only one or two points below the kirchnerism in PASO – which would be the best scenario at least in the previous reading – showed that nothing was confirmed later. In other words, even small differences in elementary school will not allow the government to change it by force.

Therefore, What emerges from all the known surveys so far is that the chances are shared equally: 50% -50% for each formula. Some political scientists have shown in meetings with investment banks in the past few days that they are a bit more optimistic about exchange rate stability, lower inflation, and improved economic expectations. This will slightly move the balance in supporting the Government in the last two weeks. In this scenario, there will be a chance of winning 55% to 45% for the ruling party and opposition.

Already in the last financial week there was an increase in anxiety about the election results. Behind him is the fear of mistakenly setting opportunities for each formula. In other words, the trust that might be excessive from the government's victory can clash with the results of the PASO, if the difference turns out to be greater than expected.

The current value of the stock, the risk of the country and the dollar is far from the light years ahead of what can happen if the Fernández-Fernández formula is applied. Estimates handled by investors are nothing but apocalyptic.

This week Balanz Capital estimates that the exchange rate could fly to $ 70 if Kirchnerism returns to power. Preliminary estimates among investors consider that the country's risk will be at levels between 1,300 and 1,500 points against the current 800 points. And actions can reverse everything they have gotten in the past two months. That is, they will fall more than 40% in dollars.

Of course it is possible that in terms of victory, Alberto Fernández quickly separated from Campora and old Kirchneris recipes. He has said that he does not agree with the exchange rate and that default is not an option. He also criticized Cristina's INDEC, despite the fact that the touch of the index began with Néstor Kirchner in 2007, when he became chief of staff.

It is important to know the names of those who will accompany him in the potential cabinet to better understand the purpose of his government. But before that happens, the market will severely punish Argentina's assets if the government fails to maintain power.

The risks faced by investors in this scenario are very large. If the preliminary election does not validate the feeling that the government is slightly less than scratching the re-election, they can be subject to heavy losses.

Even the magic number "5 points" difference may not be enough. If Kirchnerism takes that distance at the primary level but with a very high level of polarization, it can be an impossible gap to narrow in general elections. José Luis Espert will be very diluted and hence the possibility of getting a vote is reduced. And it is not clear that those who chose Roberto Lavagna will be willing to choose Macri rather than Fernandez.

The problem behind this reason is as follows: If Macri finally wins, the possibility of a substantial increase in prices exists, but maybe a spectacular rally will not happen again. This is because prices have included high opportunities for official wins. On the other hand, adverse results will be very difficult from a patrimonial perspective for those positioned in Argentina.

What is behind this real scenario of extreme trust in government victory in elections, when polls mark something else? It is difficult to enter market psychology, but several causes can be mentioned:

The perception of a very negative image is maintained by Cristina Kirchner, even when corruption does not appear to be the most alarming problem among voters. Even in the province of Buenos Aires, the former president maintains more than 50% of rejections.

-Only with the stabilization of the dollar and a decline in inflation, future expectations about the economy and the personal situation rose sharply. When the good news will follow, the Government will continue to climb the slope until it wins.

-The "bias" of international analysts is to listen more to the Government than the opposition. In each meeting they held, both the chief of staff, Marcos Peña, and the finance minister, Nicolás Dujovne, painted a very positive scenario for the opportunity to elect the ruling party. Even now they are trying to send to the market that they are not afraid & # 39; if Kirchnerism wins at PASSES because then they will reverse the results.

– It is assumed that the extraordinary support of the United States and the G-20 will also have weight for the decisions of voters. The government also expressed the idea that it is appropriate to continue to elect them to maintain this strong international support. It is not clear, however, that for the public it is a relevant fact that Donald Trump supports Macri. Even the last authorization given by the IMF to Central to sell up to US $ 3,600 million in confirmed futures contracts made it clear that the US government was playing for Macrista's victory.

In the remaining three weeks until PASO surely greater uncertainty for these results will be recorded. For now, Central makes it clear that "exchange rates" cannot be negotiated. As soon as the dollar starts to rise, it comes out controversially to sell futures and not stop all week. So he came out quickly to "mark the court". The initial floating dollar strategy agreed with the IMF went to winter, at least until the end of the election period.

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