What Jumps Out : ‘Fedesarrollo – Mixed Signals’

As mentioned in yesterday’s WJO, Fedesarollo released their latest Financial Opinion Survey for February, in addition to the most recent Stock Market Confidence Index – links to the full reports are at the foot of this note, but here are the highlights.

Overall there is somewhat of a mixed picture – as opposed to the last few reports where everything pointed towards an economy in serious risk of overheating, there are one or two signals that things are a little more under control.

The main area of concern is inflation with YE22 expectations again rising , this time from 4.6% to 5.1% – well outside the authorities 2-4% band – and with a January reading of 6.94% there are serious concerns that the situation is getting out of control.

As a reaction to this the Central Bank increased rates by 1% to 4% at their most recent meeting, analysts now predict a 6% interest rate at the end of the year but clearly much will depend on the performance of inflation during the year.

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

Yesterday we had the 2021 GDP rate published. At 10.8% it was above the 9.3% consensus estimate however after President Duque’s “At least 10.2%” comment on Monday, perhaps no real surprise. This is of course highly encouraging, especially as the world fell apart during 2020 however, as per many countries, the low hanging fruit has now been picked, the harder work is ahead. For 2022 the latest consensus estimate according to the survey is 4.2% which is down from 4.5% in January. Overseas entities have been predicting the latter, which will represent the fastest growth in Latam, but time will tell.

The Peso ($3885 YE22 Consensus) remains a lottery – with an election in three months and the ‘red under the bed’ narrative continuing, as well as a volatile oil price, it is an impossible call.

Switching to the markets, Social/Economic factors (58.3%) is by far the most important determinant as elections draw closer. In terms of investment preferences there is a huge preference for index linked bonds both public and private, after the ramp up in the COLCAP, equities are  for the moment somewhat off the radar.

For those looking at the COLCAP due to the early 2022 surge only 10.7% see an increase of 5%+ over the next quarter, the sectors in play are Oil & Financials (80% each) – in terms of individual stocks heavyweights Ecopetrol and Bancolombia are the top picks.

In terms of Stock Market Confidence it stood at 85.29% (down 1.9% MoM) but that is understandable given the record in the COLCAP over the past couple of months.

Full Reports

Financial Opinion Survey : https://tradersbvc.com.co/categorias/productos?cp=NzE=

SMCI : https://tradersbvc.com.co/categorias/productos?cp=NzI=