The primaries on Sunday will offer inves- tors a stark reality check. While the elec- tion only defines which candidates will repre- sent each coalition, they also serve as a giant opinion poll ahead of October’s presidential vote. Should President Mauricio Macri do well, asset prices could boom. Should he do badly and rival Alberto Fernández takes a seemingly unassailable lead, markets could plummet. It’s all a question of margins.
“The widely accepted view is that markets will tolerate a five-percent disadvantage for President Macri” on expectations that re- newed growth will help him revert the deficit, said Siobhan Morden, head of fixed income strategy for Latin America at Amherst Pier- pont Securities.
Here are some of the scenarios:
- Balancing act: four to six points
Should Fernández win by a four to six-per- centage-point margin, the Central Bank will continue its current balancing act – defending the peso with high real interest rates, while trying not to stifle the incipient economic re- covery.
- Rally: less than four points
A narrow difference in favour of Fernández could trigger a rally on speculation that re- newed economic growth will enable Macri to revert the gap.
- Slump: more than six points
“A shortfall of more than six to seven per-
centage points relative to Mr. Fernandez could
prove an insurmountable obstacle, especially
in a highly divisive and polarised political
environment,” Goldman Sachs analysts led
by Alberto Ramos said in a recent report. “The
likely negative market reaction in that scena-
rio would certainly complicate the president’s