What Jumps Out : Fedesarrollo Survey – Heating Up

The latest Fedesarrollo Financial Opinion Survey widely reflects what can already be seen on the ground in Colombia – the economy is starting to heat up.

The full reports can be viewed here and here, however here is synopsis of the main points to digest:

Growth: Amidst an environment where we see both analysts and overseas agents increasing their growth recommendations for both 2021 & 2022. A month ago the average 2021 estimate stood at 7.2%, which has now risen to 7.8%, with a top end of 8.2%. It is worth noting that this week one local research house (Valores Bancolombia) issued a ‘top end’ of 9.6% which raised a few eyebrows. That said, the data continues to point towards a very healthy rebound.

Inflation: A mixed bag here. We already stand at 4.4% and analysts are expecting a further increase to 4.46% next time around and to 4.74% by year end, up from 4.2%. However, the expectation is that during 2022 this will decline once again to 3.56%, back within the government’s long term 2-4% target.

Interest Rates: The 18 months or so at 1.75% appear to be coming to end and according to 88.9% of analysts that will be at the next meeting when rates will rise to 2%. Furthermore 52.8% are looking for a year end rate of 2.5% and 30.6% are anticipating 2.25%. By the end of 2022 the consensus number is 3.5%.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Peso: As ever a tough read; the main reason being the ongoing struggle between better oil prices which should cause valuation and outflows related to the loss of investment grade and forthcoming elections. The current estimate for YE21 is 3745 (from the current 8300) with a further move to 3640 by YE22. The anticipation is that both oil prices and production will be higher in 2022 and once the elections are out of the way there will be room for revaluation.

Investment Drivers: At this current juncture investment managers are relatively agnostic in terms of influences. Monetary Policy (25%), Fiscal Policy (19.4%) & Economic Growth (19.4%) are seen as the main drivers. External events (11.1%) are not seen as a key driver.

COLCAP: Whilst there has been tempering of how far the COLCAP will rise over the next three months, 91% believe it will rise versus 83.8% in August. In terms of sectors Finance (71.4%) & Holding Co. (71.4%) are the top picks with a bounce back in oil to 57.1% from 36.4% last month. If we bore down to top stocks the current choices are Ecopetrol (42.9%), PFBColo (33.3%) & Grupo Argos (33%).

Stock Market Confidence Index: As we see above there is a high level of confidence in the COLCAP – in September 96.97% were optimistic versus 94.57% a month ago and 7.2% higher than 12 months ago. There were also increases in both the Crash Confidence (71.43%) & Valuation Confidence (94.44%) indices. There was a drop in the Buy on Dips index to 53.85% which is slightly disconnected from the other readings around the COLCAP.

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops