El repunte del apetito por el riesgo continúa
El rally ha sido generalizado: El índice MSCI World ha avanzado cerca de un 40% desde los mínimos de marzo, el
índice de materias primas de Thomsom-Reuters más de un 30%, el petróleo crudo Brent cotiza por encima de 40
USD/barril por primera vez desde principios de marzo y los futuros sobre renta variable siguen registrando
ganancias antes de la sesión europea. El apetito por el riesgo ha mejorado, ya que las expectativas de una rápida
recuperación económica global se vieron reforzadas durante la sesión asiática por los datos del PMI compuesto
chino publicado por Markit. El índice subió a 54,5 en mayo desde el 47,6 del mes anterior, la lectura más alta desde
enero de 2011. Las esperanzas de que el gigante asiático se haya recuperado totalmente de la pandemia han
favorecido la recuperación y propician un mejor comportamiento de los activos de riesgo. Advertimos que los
riesgos son importantes, y que ya se ha descontado un gran número de buenas noticias, por lo que se espera que a
corto plazo se produzca un retroceso ya que la pandemia no ha terminado. El impacto económico no se
desvanecerá en unas cuantas semanas y otros riesgos como las guerras comerciales, la incertidumbre política e
incluso las protestas en EE.UU. podrían desencadenar una reversión de la tendencia en breve.
Las divisas LatAm se muestran imparables mientras el USD sigue tambaleándose
La correlación entre los activos de riesgo en términos de USD ha sido relativamente estrecha en los últimos
meses. A pesar de un nivel de productividad global reducido, la renta variable siguió avanzando y los inversores
mostraron su preferencia por el efectivo en un entorno de bajo rendimiento. Es probable que esta dinámica sea el
resultado de un nivel de liquidez sin precedentes, unido al optimismo que rodea a la reapertura de los negocios. El
repunte de las divisas LatAm parece imparable porque la Fed mantiene un alto nivel de oferta de USD. Aunque la
recuperación de los activos de riesgo puede parecer exagerada en términos de USD, su continuidad es posible
dadas las circunstancias. En esta fase de corrección del USD, preferimos seguir manteniendo un posicionamiento
moderado y vigilar la siguiente ronda de medidas gubernamentales.
El COP se recupera mientras el petróleo sigue repuntando
El COP tuvo otra sesión positiva, avanzando más del 2,2%. El comportamiento del COP reflejó la continua
preferencia de los inversores por los activos de riesgo, y el repunte de los precios del petróleo probablemente
proporcionó un impulso adicional a la divisa. Al mismo tiempo, la oferta de bonos locales también ha captado
flujos de USD, lo que pone de relieve la abundante liquidez que impera actualmente en el mercado. Todavía podría
producirse una inversión de los flujos si las empresas tuvieran dificultades para generar ingresos en el tiempo,
pero la dinámica a corto plazo favorecería al COP durante más tiempo, ya que la tendencia general del USD podría
marcar la pauta del COP.
COLOMBIA STRATEGY – Central Bank Cuts Rates to 2.75%. More Easing Still to Come.
Last week the Central Bank of Colombia announced a 50-bps cut, bringing
the repo rate down to 2.75%, in line with our expectations and the market
consensus. This is the third cut that the Bank has delivered since the Covid-19
pandemic started –rates have since been reduced by 150 bps in total. The
decision was split, as five board members voted in favor of the 50bps cut and
two others instead voted for a quarter-point cut. The reasoning behind the
decision: (1) April headline CPI printed 3.5% y/y and the expectation remains
that further retrenchment will take place, following very weak aggregate
demand, (2) growth expectations have been adjusted downwards further,
and the job market has continued to deteriorate aggressively – the national
unemployment rate for April increased to 19.8% and the participation rate
dropped to 51.8%. On the positive side, (3) rate cuts have helped to improve
financial market indicators and financial conditions, and those better
conditions will likely help the performance of the economy once the
pandemic is over.
The next CB meeting is scheduled to take place on June 26th. CB Director
Echavarría has continued to mention that the Board has the intention to
remain relatively conservative on the rate-cutting front, to avoid risking an
aggressive capital flight process. We understand the concern from the Board,
yet we believe that the dramatic nature of the ongoing economic collapse
will force the board to deliver further stimulus. The markets are expecting the
CB to deliver another 100bps in cuts in the yearly period. We expect the CB to
deliver another 75bps.
The expectation from investors remains that, as lockdowns are eased, activity
remains likely to rebound fast, on the back of pent-up demand and the
“need” for the population to come back to some sort of economic normality
–keep in mind that about 40% of Colombian workers are informal. If a
relatively quick rebound of the economy does take place, then the aggregate economic
growth contraction should amount to about -4.10% for 2020 according to
the latest version of the Citibank market expectations survey. Some local pundits are now
forecasting that the headline contraction of growth during Q220 may come close to 12% y/y, a
forecast we agree with. The good news is that if things flow relatively well going into 2021, that is,
if an eventual second wave of the virus does not get extremely out of hand, the Colombian
economy could print an increase of 3.30% y/y next year –according to the consensus in the
market.
Our Bottom Line: The evidence is clearly showing that Colombia has been able to flatten the
Covid-19 curve quite aggressively –Colombia has been widely touted as one of the most
successful countries in the world in terms of keeping the velocity of contagion of the virus
contained and in terms of total deaths per million inhabitants. In fact, our models are showing
clear evidence at this time that the government may have, in fact, “overdone it” in terms of
flattening the curve, a development that will likely imply that the incidence of the pandemic in
Colombia may prove longer than, for example, Germany or Italy (our models are showing that
the pandemic in Colombia may last +/- 150 days from tail to tail, compared to +/- 100 days in
the case of Italy and Germany, see graphs above and below).
Our current 2020 growth forecast interval for Colombia (from negative 3% to a negative 5% y/y)
assumes that the US and the world economy do enter an economic upswing during the second half of this year with oil prices further increasing as the year evolves, and that the Duque
administration continues to reopen the economy despite the virus continuing to linger among
the population. We think that Colombia’s 2021 fiscal situation will prove to be very complicated
and will demand some adjustments on current tax legislation –such as no longer reducing
corporate taxes come 2021.
We think that US markets have continued to price-in a V-shape recovery in the world economy.
If the signals coming out of the US markets turn out to be right, Colombia may be able to, in fact,
survive 2020 without losing IG status from any of the three agencies, thanks to higher oil prices,
growing external trade dynamics, and the conviction by those same rating agencies that the
government will be able to reverse emergency spending measures fast. That said, if the world
economy falters going forward, we do see a material risk of Colombia losing its IG status from at
least one of the major three rating agencies in the forthcoming yearly period. From an
endogenous point of view, our main concern remains the possibility of the Duque administration
making a policy mistake –i.e. proving to be too conservative on the health front, meaning that
the economy remains shut for longer than optimal. As we have argued in all our recent pieces,
we remain constructive on the outlook for this credit.
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GLOBAL *The global rally in stocks holds its momentum while Treasuries dip with gold, and a dollar gauge hit its lowest level since early March *7am: MBA Mortgage Applications, prior 2.7% *8:15am: ADP Employment Change, est. -9m, prior -20.2m *9:45am: Markit US Services PMI, est. 37.3, prior 36.9 *10am: ISM Non-Manufacturing Index, est. 44.4, prior 41.8 *10am: Factory Orders, est. -13.4%, prior -10.3% *10am: Durable Goods Orders, est. -17.2%, prior -17.2% *U.K. Services Slump Moderates in May on Lighter Lockdown *Italy Racks Up Record Bond Orders a Day Before ECB’s Decision *Eurozone May Composite PMI 31.9 vs Flash Reading 30.5 *Hong Kong Stocks Erase Selloff Sparked by National Security Law *BoE Says Banks Need to Prepare For a No-Deal Brexit COLOMBIA *Brent Crude Erases Gain as OPEC+ Meeting in Doubt Over Cheating *TBA: Colombia will offer inflation-linked bonds, known as TES UVR, due 2049 *Colombian court begins investigating ex-president Uribe
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Risk markets remain steady this morning with equities continuing to shrug off the US protest and US yields slowly climbing while commodities present more of a mixed picture. Energy markets are focusing on the upcoming OPEC meetings and related headlines this morning, while metals trade a bit softer.
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- According to the most recent data from Johns Hopkins University, global confirmed cases were last reported at just over 6.4mill while the global death toll is now at 380,764.. There is growing concern about a second wave of the virus in Iran while the US and Brazil remain the two countries with the largest number of confirmed cases.
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- Overnight economic data was positive with Service PMI’s and Composite PMI’s across Europe better than expected. In China the Caixin Service PMI was much better than expected and jumped back over 50 to post a 55 reading. In the US, today’s economic data will include ISM Non Manufacturing, Factory Orders and Service PMI but attention is more focused toward Friday’s employment data
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- In the US , we saw continued protests over the death of George Floyd and the larger issue of mistreatment of minorities in general. Last night’s protests were much more peaceful with less looting as stringent curfews in many major cities seemed to help reduce the violence.
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- In markets, global equities continue to trade higher, buoyed by the better than expected economic data and positive momentum. The oil market was initially higher but turned lower early this morning after headlines said that the OPEC + meeting will not be moved earlier and that even the scheduled event for next week may be in doubt if all nations do not commit to better compliance of their existing quotas. The oil market had rallied earlier this week on hopes that production cuts would be extended. In other commodities, metals are slightly lower as higher US yields weigh on prices.
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- In other headlines, the Republican National Committee may have to move the Republican Convention out of North Carolina due to that states ban on large gatherings unless the President and the NC governor can reach a compromise ahead of today’s self-imposed deadline by the President.
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- On the calendar today, US May ADP Employment Change (est -9000k), US May Services PMI (est 37.3), US April Factory Orders (est -13.4%) US April Durable Goods Orders (est -17.2%), US May ISM Non Manufacturing Index (est 44.4)
KEY MESSAGES
We have cut our 2020 growth forecasts for Latin
America again, as we expect economies to
experience a strong contraction regardless of the
strategy adopted in response to the Covid-19 shock.
Q2 activity has been weaker than expected in almost
all of the countries we cover, and lockdown
measures are likely to continue for longer in some
countries.
We only expect a modest recovery, with activity
unlikely to return to pre-shock levels in 2021. The
only exception is Chile.
All countries have announced stimulus measures to
cushion the economic shock, although the room to
do so varies. We see risks of rating downgrades.
Colombia: the two decades-long period of uninterrupted
growth is likely to come to an end due to the Covid-19
shock. We forecast a 3% real GDP contraction in 2020.
We highlight that we have not lowered our growth
forecast further despite the global downward GDP
revisions. Our decision reflects the country’s fiscal efforts
and active microeconomic policy. Also, recent data has
been in line with our expectations.
In contrast to other countries in the region, Colombia’s
economy was in full recovery mode when the Covid-19
shock hit. A three-year long, consumption-driven
recovery had closed the output gap by end 2019, we
estimate.
Authorities imposed a nationwide mandatory lockdown in
March that was lifted in regions considered ‘Covid-19
free’ on 11 May. Key industries were also allowed to
resume operations on that date (see Colombia: Heading
into a category 6 hurricane, published on 11 May 2020).
April data is thus likely to reflect the impact of the
measures applied to contain the spread of the virus.