What Jumps Out: A Bit Of Everything

Following on from the street demonstrations of last week – this week it was the turn of the taxi drivers to protest. It is a mixture of complaints but two of the main ones are the platforms such as Uber & Didi – on top of that the removal of government fuel subsidies are increasing their costs. The protests and threats to close down the cities – was largely a failure, much of the country after all is now accustomed to work from home. Leaving the platforms aside, the key here, I feel, is for the government to allow an increase in tariffs to compensate for fuel prices; a free market process. What shouldn’t be done is to allow any more fuel subsidies for particular sectors – Colombia needs to get itself off that particular bad habit.

From Fedesarrollo this week we had two reports:

Firstly, their monthly financial sector for February survey saw a sense of calm. The expectations for 2023 inflation rose slightly (from 8.89%-9.00%) as did the terminal interest rate (13%-13.25%) but growth for the same 2023 fell from 1.5% to 1.1% – although that remains above many other estimates, including the Central Bank (0.3%). In terms of the COLCAP, Ecopetrol and Bancolombia remain the top picks, but amidst a pessimistic view for the overall market.

Briefly on interest rates, the Central Bank head Villar stated on Thursday that Colombia was close to the end of the tightening cycle and that the impact on inflation should come soon.

Also from Fedesarrollo we had the Retail ($29.7%) and Industrial (3.6%) confidence data for January and both came in better than expected and significantly higher than December – a surprise given the poor Consumer Confidence number (-28.6%) for the same month.

Within the construction sector there is something of a confusing picture. There was a 50% drop in new home sales in January and with mortgage rates, which have never been low anyway, rising sharply, that is understandable. That said, anecdotally, at least here in Medellin – prices continue to rise sharply, that is if you can find anything to buy ! On the public side the 4G projects are largely into the home straight but the 5G works will be coming on line towards the back end of 2023 which will compensate and move that sector forward.

Solid news from the oil sector again as Campetrol reported January production of 773k bpd – down slightly on December’s 784k bpd however it was still 4.6% higher YoY and part of a gradual improvement in the trend which began to manifest itself in October.

Sticking with oil – Brent has had a complicated week and this has been reflected in the Peso which has been struggling. DXY has also largely moved against the Peso due to a mix of interest rate concerns and geopolitical events.

Within the equity market, the MSCI Colcap is still playing with a dangerous support level. In the meantime, Grupo Argos has joined Celsia & Cementos Argos in announcing continued buyback programs, between the three entities approvals are sought for US$200mn.

Wishing you all a peaceful weekend.

Roops