What Jumps Out: Fedesarrollo March Survey

Yesterday we published the latest survey for March from Fedesarrollo – that will be followed by Industrial and Retail confidence today, but we can get to that later, as per usual an abridged version follows with a link to full English report at the foot of the note.

Interest Rates: In January the Central Bank increase rates from 3% to 4% – in February there was a non-decision meeting, and now as a consequence of that and inflation (8.01%) that refuses to damp down, fully 51% of analysts expect a rate increase of 150bps to 5.5%. Another 24% expect a 1% increase to 5%. We even have 5% who expect a 2% increase to 6%. The current terminal rate of this cycle (in 2022) is predicted to be at 7%.

I think it would be a fair assumption that on March 31, it will be higher than today.

Inflation: Also this March, inflation is expected to continue accelerating to 8.45%. The ‘good’ news is that CPI is expected to fall back to 6.4% at the end of the year, still wildly above the authorities’ 2-4% band. This will be a major challenge for any incoming President.

Growth: On the bright side GDP expectations continue to improve. In March the FY2022 consensus is at 4.5%, above the 4.2% of February. For 2023 the number stands at 3.5% – according to the international agencies these would be regional leading figures.

Peso: There have been some dramatic shifts in the currency recently due to the Ukraine war and that has pushed the YE forecast down from $3885 to $3800. I like to stay neutral in these matters, but I am happy to state I think that to be wildly high at this point – oil is at $120 but the currency ($3750) is being held down (or up) by the Petro factor in the elections, that threat I believe is very much overstated.

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

Investment: Looking briefly at the rest of the report we find 63.9% of money managers see Sociopolitical factors as the most important thing on their mind when it comes to investment decisions, we are two months from an election, so no surprise.

In terms of preferred investments, it’s almost everything – as long as its indexed Private and Public debt!  In terms of the COLCAP there is little appetite to increase exposure and 50/50 split as to its current direction. For those who are looking at equities, the sectors in play are Energy (82.6%) & Finance (73.9%), top picks being Ecopetrol (60%) and GEB (25%).

As mentioned, the full link to the report can be found below, that will also point you to the Stock Market Confidence Index Report which fell 2.4% to 82.86% however looking across other metrics such as ‘Buy on Dips’ there was little to concern with a solid set of numbers.

Until Next Time

Roops

https://bvc.co/news?tab=bvc-research

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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