Shares of Chilean companies operating in Argentina surged on the Santiago Stock Exchange following Javier Milei's victory in Argentina's parliamentary elections on Sunday. Cencosud led with a 7.41% jump, its largest daily gain since January 2022. The rally occurs amid a positive global outlook driven by a preliminary US-China trade agreement.
The Santiago Stock Exchange ended with a 0.25% gain, reaching 9,207.3 points on the IPSA, its second-highest historical level, driven by strong global markets and the impact of Javier Milei's victory in Argentina's parliamentary elections. This win confirms US financial assistance of $20 billion to Argentina through a currency swap and opens the door to another similar credit line, boosting expectations for economic recovery in the neighboring country.
In this context, Cencosud shares rose 7.41%, their largest daily gain since January 21, 2022, while CCU advanced 5.33% to $6,130 and Embotelladora Andina B 4.89% to $4,100. These companies have significant exposure to Argentina: Cencosud generated 19.7% of its $17.461 million revenues up to June from that country; CCU reported $384.357 million from international businesses, including Argentina, out of total $1.397.584 million; and Andina obtained 24% of its $3.371 million 2024 revenues there.
The global outlook also contributed, with a preliminary US-China agreement postponing export restrictions on rare earths for a year and restarting US soybean purchases, avoiding a 100% tariff hike. This lifted the MSCI World by 1.11% and MSCI ACWI by 1.13%. In Argentina, stocks rose over 30% and country risk fell below 700 points.
Analysts like Macarena Gutiérrez from Credicorp Capital Chile deemed the 'positive reaction' in these stocks 'legitimate,' but warned its duration would depend on 'more fundamental aspects.' Emanoelle Santos from XTB Latam noted the rally reflects 'renewed appetite' for Argentina-exposed assets, though sustainability hinges on progress in fiscal, monetary, and governance matters. Guillermo Araya from Renta4 highlighted short- and medium-term effects, such as a stronger exchange rate benefiting peso-denominated revenues, fixed asset revaluation, and lower discount rates due to reduced country risk, increasing the value of future cash flows.
Notably, Cencosud withdrew last week from bidding on Carrefour's operations in Argentina, where it was a leading contender.