(BFM Bourse) – The Merval, the flagship index of the Buenos Aires Stock Exchange, soars 20% at the opening this Tuesday after the victory of Javier Milei in the presidential election in Argentina, a country plagued by inflation disproportionate.
The markets carefully monitor the evolution of a country’s leaders, especially if the state in question is over-indebted and struggling with unsustainable inflation like Argentina.
On Sunday, it was the liberal Javier Milei who won the second round of the presidential election organized on Sunday in Argentina against the Minister of the Economy, Sergio Massa.
The new president takes the helm of a country where inflation is one of the highest in the world. In October 2023, it was 142.7% year-on-year.
Tuesday, the S&P Merval, which is the main index of the Buenos Aires Stock Exchange, soared 16% to 746,925.87 points, after a jump of 20% at the opening. The Buenos Aires Stock Exchange therefore reacted a day late, the square in the Argentine capital being closed on Monday for Sovereignty Day.
Privatization of the state oil company YPF
The jump in the Buenos Aires Stock Exchange is driven by the surge in shares of the public oil company YPF (+34%), one of the companies that the brand new president has announced he wants to privatize. On Wall Street, YPF shares soared 40% at the close.
The S&P Merval index closed sharply up 7.11% at 645,079.59 points on Friday, the session preceding the electoral vote.
Since the start of the year, this index, which brings together around twenty stocks corresponding to large companies, has increased by more than 260%, compared to an increase of 11.7% for our national CAC 40. This index largely brings together companies from the energy, raw materials (or processing of raw materials) and finance sectors.
Above all, the jump in Merval can be explained by dizzying inflation in Argentina and the plunge of the Argentine peso, the local currency. Moreover, Javier Milei intends to “dollarize” the country’s economy, and therefore abandon the Argentine peso which he also considers waste.
“Never in pesos, never in pesos! (…) This waste is not even used as fertilizer,” he declared during his campaign, believing that a dollarization of the economy would be easier to achieve with a strong dollar against the peso.
Sabrina Sadgui – ©2023 BFM Bourse