Sunrise Over El Dorado : Alianza : December 24th 2018 Edit name

DAILY THOUGHT : Today is the 24th of December and is the day when Colombia celebrates Christmas, they are not alone in this, whilst back in my homeland it is 25th, even give the vagaries of the international dateline and the time-zones around the world I have never quite worked this out....nonetheless wherever and whenever you are celebrating or even if you are not have a very peaceful couple of days. *Note the three wise men also arrived with Gold, Frankincense & Myrrh as presents however that also seems to have expanded somewhat over the years, I am pretty sure my fashion conscience eldest and Switch playing youngest will be glad about that *

MARKETS

In reality the COLCAP did better than many might have expected as it rose 0.27% closing at 1301.86pts but that was deceptive as the final rebalance of the year came to the rescue adding 0.36% in the last 5 minutes of trading with USD 38mn of total volume (USD 65mn) being registered in those last moments. The most traded stocks were ICOLCAP (USD 10mn), GRUPOSURA (USD 9mn) and ECOPETROL (USD 8mn) and whilst BCOLO (+3.69%) , CORFICOLF (+3%) and GRUPOARGOS (+2.71%) fared well the same wasn't true of CLH (-9.87%) ,GRUPOAVAL (-8.74%) and PROMIGAS (-5.93%). *Monday will feature a shortened session with the market closing at noon with most players absent* The Peso looked set to move above 3300 with the early trading however it manged to hold on whilst it lost 0.75% it closed at 3294 - that brings the YTD number loss to 10.7%.

The bond market saw some buying at the longer end of the curve on a quiet day overall with the benchmark 2024 0.5bps lower at 6.12% whilst the 2032 fell 2.1bps to 7.14%.

The Central Bank got their business done quickly on Friday and were out of the door in time for lunch having unanimously decided to leave rates at 4.25%, no surprise to anyone.The statement maintained their GDP forecast for 2018 at 2.6% and whilst stating that the economy continues to operate below its potential Echavarria said he is optimistic on growth looking for 3.3-3.5% expansion in 2019. Switching to inflation FinMin Carrasquilla said he does not see any impact from the tax reform and Echavarria made it clear that whilst analysts are pricing in two rate increases in 2019 (we are currently predicting 4) the committee would not rule out rates staying stable for a lengthy period of time. As expected the committee announced that they will continue to accumulate reserves, the next auction for up to USD400mn will take place on December 28th with the options being valid from January 2 until February 1st, the board themselves stated that they are relatively relaxed with regards to the forex rate - that makes sense as whilst it may be a reflection of the lower oil price it also helps the rest of the export sector.

RETAIL & INDUSTRIAL CONFIDENCE Earlier this week we had a relatively disastrous Consumer Confidence number which saw a drop to -19.6 in November from -1.3 in October and much lower than the -2.0 anticipated. At the time we suspected it might be a temporary blip born out of the tax reform which at the time was looking hard at a VAT increase on a broad basket of goods. Looking at the Retailer Sector's confidence we actually find it increasing marginally in November to 28 from 26.8 in October, when we double-click we find improvements in all three sub-categories with Economic Conditions, Inventory and Production Expectations all moving in the right direction. The Industrial Sector number was weaker falling into negative territory (-4.3) for the first time in 11 months, whilst Factory Orders were positive and Inventory Levels close to flat we find that there has been considerable deterioration in Production Expectations which fell from 21 to 0 in November. The numbers are a mixed bag but still don't compare to the drop off in Consumer Confidence so arguably we can expect an improvement in that number for December.