During 2022, the financial markets have experienced one of the most negative performances in their recent history and the only assets that show positive variations are the dollar and raw materials both worldwide and in the particular case of Colombia.
(JP Morgan claims that Petro’s tweets have brought volatility to the country).
They have even been presented simultaneously marked devaluations in the different segments of fixed income and variable incomeas highlighted by Grupo Bancolombia in an analysis.
He mentions that at a global level, factors such as stagnation and inflation have been combined, the increase in rates by central banks to control price increases, and to this we must add geopolitical tensions that “are not only limited to war between Russia and Ukraine, but also to the clash between the US and China over Taiwan”.
This has generated an accelerated deterioration in financial conditions, in response to which investment flows and risk appetite have been generally reduced.
(Migration and food crisis, challenges of the OAS summit).
the local plane
And in the Colombian case, uncertainty is added by the “ambitious reform agenda that the current government seeks to promote in the context of large fiscal and external deficits,” he says.
In this way, says Bancolombia, the country’s financial assets show the steepest falls in the last two decades.
Thus, the fixed income index in Colombian pesos, measured by the JP Morgan GBI-EM index for Colombia, has fallen by 16.5% year to date. For its part, the EMBIG index, which measures sovereign fixed income in dollars, contracted 15.2% and the CEMBI index, which measures private debt in dollars, fell 16.9%.
Meanwhile, the Colombian stock market, measured through its Colcap index, has fallen 16% so far in 2022. Bancolombia says that only in 2015 there was a greater devaluation.
The report assures that it could be argued that this performance “is the expression of the challenges that the global and local economy will face in 2023. Under this logic, the markets are incorporating many negative elements. However, it could be argued that, to the extent that the identified risks materialize, a favorable change in trend would occur.
The Grupo Bancolombia report says that according to calculations, the fundamental value of the MSCI Colcap index reaches 1,765 points. “This implies a valuation potential of 56.4%, a figure rarely seen in history. The stated value reflects the fact that corporate results up to the first semester are mostly positive. In particular, the improvements in EBITDA, net income, profit margins and leverage levels stand out”.
In addition, the depreciation of the shares has led the dividend yield of the MSCI Colcap index for the next 12 months to be above 11%, a value similar to the return of local fixed income.
That is why if the fundamental potential and the dividend flow are added, the total expected return of the index exceeds 67%, with an average of 84% by companies.
Bancolombia assures that this is a very relevant figure for an investor with a long-term perspective, who has liquidity and who has a high tolerance for risk.
The group says the big question is what it would take for the value of listed companies to materialize.
A part of these catalysts depends on what happens in the rest of the world and there it is key that the elements described are normalized and in Colombia “it is important to generate conditions of certainty in relation to the economic policy framework and the course of the reforms” .