Alicia Garcia Herrero & Junyu Tan (Natixis) | After the pre-emptive announcement to suspend all foreign debt repayments until discussions for an IMF bailout are completed, on May 18 Sri Lanka stepped into the dangerous path of a sovereign default as it missed the 30-day grace period on its USD 78 million worth coupon payments originally due April 18. Against this backdrop, investors’ key question is how deep the debt…
While the new bonds may continue to benefit from a weak US dollar and the lower-for-longer global rate environment, the challenging economic outlook and ongoing uncertainty around the IMF talks will likely cap the yield compression potential.
Andressa Tezine (Fidelity) | The sharp fall in Argentina´s bonds and international shares, after President Macri´s surprise defeat in Argentine primary elections, could spread to other Latin American and emerging markets while investors look to re-balance their positions.
Naturgy has reached agreement with Argentina to recover 120 million euros. The company has been suffering significant damage to its accounts from the hyperinflation and the devaluation of the Argentine peso this year.
President of Argentina, Mauricio Macri, has not taken long to see the writing on the wall: he has officially asked for help from the IMF. On Monday, the peso/$ devalued 5%, which is a savage drop. Domestic and foreign equity have completely lost confidence in the economic governance and have fled terrified, with huge losses, given the peso’s accumulated depreciation.
Telefonica is starting the process of preparing a stock market listing for a stake in its currently fully-owned Argentine subsidiary. In the upcoming AGM on April 16, it’s expected that authorisation will be sought from shareholders to go ahead with the share placement.
Telefónica is continuing with its plans for cutting group debt – estimated at 50 billion euros – by divesting stakes in some of its subsidiaries and ruling out any major new acquisitions. On the one hand, the company is still preparing to list a minority stake in its UK mobile subsidiary O2 towards year-end, on the other they are considering to sell Telefonica Argentina.
The precipitous drop in oil prices in particular has forced rentier states, which were able to count on massive energy profits to fund generous state largesse up until a few years ago, to diversify their economic relationships with Europe and the rest of the world. These profits allowed states like Saudi Arabia and Iran to get by with incredibly inefficient economies, which officials in both countries are now actively restructuring in order to stimulate real growth and attract international business.
BARCLAYS | Argentina’s incoming finance minister, Alfonso Prat-Gay, has made some important statements about short-term economic policies. We think that his comments are steps in the right direction and indicate pragmatism, in that they seek a solution to economic problems while addressing restrictions imposed by social, political, and economic realities.
The election of Mauricio Macri, the candidate for the Cambiemos (Let’s Change) coalition, as president has been welcomed as a potential turning point in Argentina’s financial, political and foreign policy outlooks. The country’s economic performance has been overshadowed by high inflation and isolation from global capital markets, and planned reforms will likely boost its exports and could accelerate investment in areas such as infrastructure and the nascent shale gas sector.