Sunrise Over El Dorado : Nov 26th

DAILY THOUGHT : Setting adding the slumping approval ratings for President Duque, which ironically may be helped by the failure to push VAT onto the family basket of goods, there are reasons for concern less than four months into his administration. His defacto boss Alvaro Uribe is trying to put together a coalition of the willing however at this moment in time getting legislation through Congress is looking a laborious affair - the Economist puts it well in its latest edition. (https://www.economist.com/the-americas/2018/11/24/the-difficulty-of-being-ivan-duque)

Another benign day (USD12mn) in terms of volumes as the COLCAP dropped -1.25% , closing @ 1370.91pts, the MOC orders were negative but only had a marginal effect with USD2mn traded. ECOPETROL (USD 6.3mn) dominated proceedings with the best performers being ETB (+4.6%) , CONCONCRETO (+3.45%) and CORFICOLF (+2.62). To the downside were PFAVH (-4.17%) , ECOPETROL (-3.82%) and GRUPOAVAL (-2.83%). The Peso traded surprisingly high volume (USD1bn) given the half day in the US as the currency fell 1.16% to 3228, another weak point for 2018 and until such time as oil rallies we will be wallowing around these levels. In reality speaking to the economics team in terms of the macro situation the Peso level within reason doesn't impact as commodities are more or less 50% of the volume.

The bond market after a few good sessions fell on Friday along the curve with the benchmark 2024 rising 4.5bps to 6.375% and the 2032 up similarly (4bps) to 7.42% - volumes were average at best.

This tiny segment will be used for a brief update of the shenanigans of the tax reform debate :

No surprises that the tax reform took up a few column inches this weekend as well as on Friday, as we know the focus over the next week or so is going to be where expenditure can be cut in 2019. One Cambio Radical Congress member suggested that the politicians are looking at eliminating the 14% capital gains tax on bond trading - the concept of a reduction has already been addressed and dismissed by all accounts so it is hard to see such a proposal getting anywhere. MOODYs in their latest comment on Colombia also made mention of the reform saying that the lack of a credible fiscal plan could be part of any decision to downgrade the country and that "greater clarity on reform prospects would contribute to restore investor confidence..."

The DANE late last week reported on new home prices for Q3 here in Colombia and it is a case of steady a we go with some modest signs of growth - the Q3 reading was 7.59%, the highest in almost two years and if we look at the YTD number of 6.63% we also find it the strongest reading for a couple of years.Between houses and apartments there is very little distinction at this juncture - when we look at regions and economic groups there is no distinct pattern.

Turning to mortgages for housing and the level of credits we see positive numbers on a 9m basis although there are signs of hesitancy. Overall we saw Q3 growth of 6.5% YoY however those same rates in Q1 & Q2 stood at 17.9% & 10.7% respectively although they were versus some generous comparable numbers. Looking at the actual Peso amount YTD we are at record levels and that is reflected in the financial sector data which have seen mortgages as one of the driver so the said sector however we if are witnessing a post-election slowdown or perhaps pre financial reform slowdown then it will be a concern for the banks given the sluggish development of the commercial sector.

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