Dec
18
Shares of Argentine bank holding company Grupo Financiero Galicia (NASDAQ:GGAL) are seeking to right themselves after a surprising sell-off in the aftermath of Argentina’s Nov. 22 election.
The election saw the end of the era of Cristina Fernandez de Kirchner. First her late husband, then she headed the Argentine government from 2003, employing top-down populist policies. Her favored candidate to succeed her was Daniel Scioli.
But defeating him was Mauricio Macri, mayor of Buenos Aires, who promised a more business-friendly approach.
Since taking office Dec. 10, Macri announced an end to export tariffs on agricultural products and is moving ahead with plans to end subsidies on utility bills, which have contributed to a widening fiscal deficit. He has appointed a new central bank president, and on Wednesday the currency controls that Kirchner introduced in 2011 were lifted.
All that should be good news for a big Argentine bank, and it seemed like it was. A week after the election, Moody’s raised its credit rating on Argentine banks from stable to positive. “We expect the new administration to improve the economic and institutional climate over the coming months through a series of reforms aimed at tackling persistently high levels of inflation and lack of data accountability,” the rating agency said.
The Friday before the Nov. 22 election, the stock hit a new high and opened higher the following Monday in celebration of Macri’s victory. But the stock reversed that day and closed 9% lower on heavy volume. It might have been a case of investors buying on the rumor and selling on the news.
The stock fell below a 26.23 buy point from a late-stage cup base, but found support at its 50-day moving average. On Thursday, it peeked above the buy point, but couldn’t hold the line in the face of general market selling Friday.
Days before the election, the bank reported earnings at the equivalent of 97 cents a share, a 15% increase from a year earlier and well above analysts’ estimates. Wall Street is not so optimistic on the future. Analysts see a 13% decline in the next quarterly report, and corrective measures that the new government must take could hurt bank earnings in the near term.
A recent Raymond James report said the bank is well positioned to benefit from economic reforms.
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