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Sunrise Over El Dorado : Alianza : December 7th 2018

  • Writer: Rupert Stebbings
    Rupert Stebbings
  • Dec 7, 2018
  • 3 min read


DAILY THOUGHT : The Colombian justice system is infamous for its snail like progress in most any case (see ETB below) and the gremlins are once again have appeared in the system. In the case of Odebrecht the Fiscal had to wothdraw from the case himself due to his past work with Grupo Aval - he then nominated a list of three people who could serve as a ad-hoc Fiscal in this case. One of those candidates has now dropped out due to a conflict of interest and according to the Supreme Court this means there can be no election between the remaining two i.e. the process is back to square one. Nonsensical if predictable.


MARKETS


The COLCAP dropped 1.31%, closing @ 1390pts. on total volume of USD 40mn, given the performance of markets such a move really was no surprise, amidst that volume the most traded stocks were ECOPETROL (USD 16mn), PFBCOL (USD 9mn) and GRUPOSURA (USD 3mn), the former of these led the losses falling 3.73%, closely followed by PFAval (-2.84%) & PF BColo (-2.31%). Providing some relief were PFCEMARGOS (+2.05%) , PFAVH (+1.90%) and CANACOL (+1.54). The Peso is still struggling to stay below 3200 an close 0.86% weaker yesterday at 3186 having at one point traded very close to the aforementioned barrier - volume on the day was USD1.31bn, around average over the past couple of weeks.

The bond market was the outlier yesterday and actually strengthened slightly with the 2024 (6.30%) & 2032 (7.32%) both down a couple of basis points at the close.


TAX REFORM

Nothing to add of note today - we have gone into quiet mode until the full Congress has its say next week - that's not to say there isn't a ton of moaning and groaning on. As ever the whole world accepts we need a tax reform just as long as it doesn't touch their sector - it appears to be a simple matter of avoiding VAT on your product if you have enough lobbyists stalking the halls of power.


ETB


No word of a lie it has been so long since this went to the judges I had forgotten there was even a sale process being proposed. The magistrates from the First Section have confirmed a ruling by a judge in 2017 that the District of Bogota's attempt to sell the telecommunications company is over..... ...........however............the justice did add that it could be possible to approve the ale if it is included as part of the Development Plan which would have to pass through the Council's Territorial Plan.... No doubt in 2019 this subject will raise it's head once again.........


HOUSING - ON THE TURN ?

Our impressions of construction activity with information for the third quarter of 2018 show a recovery in economic activity but one that still needs to be consolidated. The GDP of building construction activity grew 4.1% in the third quarter of the year and accumulates a fall of 1.8% in the course of the year. The dynamics of construction licenses, which is a future indicator of this activity, show that the worst has already passed and that there are signs of recovery to return to present a positive result, both in housing licenses of social interest, as in licenses for destinations other than housing. On the demand side since the close of 2017 we have begun to see instances of recovery, households already showing a greater willingness to buy, in September the index showed a result of 7.5% in the national total, with a slight decline to 2.5% at the start of the last quarter of the year. In addition, it can be see that the reductions in interest rates has already had an effect on the propensity to buy. At Alianza we believe that the worst news is over and that the recovery of this sector should begin once confidence on the demand side is solidified. The factors that should contribute to this greater dynamism :

  • The beginning of a greater dynamism in housing loans, due to the fact that the interest rates for acquiring housing are located at minimums.

  • A greater willingness to buy housing.

  • A perception of lower risk by the sector and the economy in general, after the dissipation of electoral noise.

Finally, for the time being for 2019 we consider that the Tax Reform could reduce the dynamism of the activity, due to the fact that there is proposal to tax the purchase of new or used houses that have a value above COP900mm (USD280k) at a rate of 2%.


 
 
 

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