The fall of Wall Street and the commercial war: how they affect the Argentine stocks in New York – 10/12/2018



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Only 48 hours after the closing of the celebrated G20 summit in Buenos Aires – This concluded with an alleged trade truce between the US and China and a rise in stocks the next day Wall Street plummeted: the industry indexl Dow Jones fell 799 points in one day and closed the week almost 1500 points below. O Nasdaq, which on Tuesday, December 4, fell -3.80% and the S & P500 -3.22%.

The Argentine fund and newspapers

For lack of confidence in the truce between the United States and China, aggravated by the arrest of the executive of HuaweiWall Street also fell on Thursday of the same week – there was no US operation on Wednesday – though dampened a late recovery in technology stocks, following statements by the regional presidents of the Federal Reserve.

However, the next day, the three main indexes closed again, with significant declines. On Monday the actions in the US they had a slight peak after those days. Even so, the Dow and Nasdaq continued their profit margins year-on-year (+ 0.42% and + 2.6%, respectively), but not the S & P 500 index, , with -1.83% per year.

That way, Last week was a new downward spike accompanying those of October and February. On October 10 of this year, Wall Street experienced its worst decline since February, the Nasdaq had its worst value since June 2016 when it was the Brexit. That February 5, 2018, the Dow Jones had suffered the biggest drop in points in its history, with a decline of 1,175.21 units.

The shares denominated ADR are listed on the New York Stock Exchange (NYSC) and in Argentina, but remain the same asset. In other words, it is the same company that only quotes in two places, and the difference is the price adjusted by the exchange rate. EFE / Justin Lane

The shares denominated ADR are listed on the New York Stock Exchange (NYSC) and in Argentina, but remain the same asset. In other words, it is the same company that only quotes in two places, and the difference is the price adjusted by the exchange rate. EFE / Justin Lane

In this context, the Argentine newspapers in New York (the ADR), in the first week of December (from the closing of Friday 30/11 to 7/12) mixed returns. In some cases, they were able to carry losses of almost 9% for Corporación América. Tenaris, for example, closed this week at -6.1% (they are companies linked to the scandal two notebooks). On the green side appears Carrier Gas del Sur (TGS), which accumulates + 3% so far this month. However, if the percentage is contemplated in the year, the numbers plummet: falls, in shares like Supervielle, reach 70% below.

What are ADRs?

The actions called ADR are cited New York Stock Exchange (NYSC) and Argentina, but it is still the same asset. In other words, it is the same company that only quotes in two places, and the difference is the price adjusted by the exchange rate.

"In the last two weeks, at least, the Argentine SARD, except in specific cases, performed positively even in the midst of the twists and turns of the commercial war.Thus, actions such as TGS and Galicia were, at least for the time being, on the fringes of recent Wall Street declines. They well defended the comings and goings between Trump and his Chinese counterpart. On the other hand, in the case of actions in judicial matters, such as Tenaris, Ternium and Loma Negra, suffered attacks from potential derivations of judicial escalation, and still see a high degree of uncertainty"He says to Clarin Emiliano Wachs Chief Research Officer Alchemy Values analyzing until the end of last week,

Wachs, however, differs from the annual map in the ADR: "The 70% drop in some stocks and the overall market so far has to do with the deterioration of the local macroeconomy, with an expected 2.5 percent to 3 percent drop in GDP and a government that had to leave and ask the IMF for funding to close its financial program after the funding markets for our country were closed. Add to this a mega-devaluation, rising inflation and doubts about the continuity of the move next year"

Only 48 hours after the closing of the celebrated G20 summit in Buenos Aires - which ended with a supposed trade truce between the United States. and China Wall Street plummeted: the Dow Jones Industrial Average index fell 799 points in one day. The market doubts the agreement. REUTERS / Kevin Lamarque / Photo archive

Only 48 hours after the closing of the celebrated G20 summit in Buenos Aires – which ended with a supposed trade truce between the United States. and China Wall Street plummeted: the Dow Jones Industrial Average index fell 799 points in one day. The market doubts the agreement. REUTERS / Kevin Lamarque / Photo archive

Jorge Neyro, from ACM, "Wall Street stocks showed declines approaching 3% two days last week, due to renewed tensions between the US and China. the flattening of the yield curve of US Treasuries that could indicate a recession in the horizon of the American economy. In this context, ADRs have largely eliminated post-G20 earnings. In the same way, some companies were affected by new news about the cause of notebooks and possible demands of investors for losses in contributions. "

For Neyro, the fall in ADRs this year has to do with a number of local and external factors: "In foreign markets there is a lot of volatility, but the Argentine crisis and judicial issues have a strong impact." Although the Merval and the ADRs are usually coupled, because in many stocks the only difference is that they are quoted in pesos or dollars, and that the bonds are another type of asset, Neyra estimates that "The shares and the bonds are down, if there is a lot of aversion to the Argentine risk, as happened during this year's crisis."

The commercial war

The landslides in the United States have their spearhead in technology. The stock of stars, the calls FAANG Actions (Facebook, Apple, Amazon, Neflix and Google's parent company, Alphabet) drag the sharp falls to their highest peaks of the year: FB (-35%), Apple (-27%), Amazon (-18%), Netfilx (-35%), Google (-18%).

Amazon rose more than 70 percent by October. So far, so far, more than 18%. (AP Photo / Mike Stewart, Archive)

Amazon rose more than 70 percent by October. So far, so far, more than 18%. (AP Photo / Mike Stewart, Archive)

Why did they fall? The commercial war is already impregnated, that is, Chinese imported components that impact some companies in this series such as Apple or Amazon, but also affects the structure of the business model of many American corporations. Analysts, however, They introduce other elements such as the year's growth, such as Amazon, which rose more than 70% by October.

The enthusiasm after the G-20 summit was diluted with the days. Robert Lighthizer, Secretary of Foreign Trade, was appointed as the leader of the group of US negotiators, a decision fell as well as is known for his frontal criticism of Beijing's trade policies. Larry Kudlow, Trump's top economic adviser has called for "cautious optimism" over the truce.

Outlook on ADR

-What perspective do you see in the ADRs in the context of renewed tension between the US and China and internal factors, such as in the case of bribes?

"There are documents where there is value and as the case of TGS or CEPU (Central Puerto) .But the reality is that in addition to the US-China tension the question will be around the polls … With everything, After the fall of Argentine assets throughout the year, we believe that today the impact of factors coming from abroad is marginal, and we see this short-term decoupling between medium- and long-term bonds and Argentine stocks, where it is still defined if the shares will yield, or if the securities and the country risk will return to levels a month ago, "comments Emiliano Wachs.

The enthusiasm after the G-20 summit was diluted with the days. Robert Lighthizer, Secretary of Foreign Trade, was appointed as the leader of the group of US negotiators, a decision fell as well as he is known for his direct criticism of Beijing's trade policies. (Photo by Jim WATSON / AFP)

The enthusiasm after the G-20 summit was diluted with the days. Robert Lighthizer, Secretary of Foreign Trade, was appointed as the leader of the group of US negotiators, a decision fell as well as he is known for his direct criticism of Beijing's trade policies. (Photo by Jim WATSON / AFP)

Strictly speaking, the spread between Global 2021 and Global 2019 already exceeds 600 basis points. The first has an IRR (yield rate) of the order of 10.7%, while the Global 19 yields 3.73%. In this differential, that is, the higher the yield, the higher the risk assessment, the market uncertainty is seen in 2019. In turn, on Monday, the ADR restarted in cases of more than 5%.

"Difficult to predict this", concludes Neyro on the perspectives on Argentine newspapers in New York. "In the medium term, if the Argentine economy grows again with lower exchange rate volatility, they will be able to show profits again.But these factors you mention – commercial war, legal situations – may continue to affect"

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