Sunrise Over El Dorado : Alianza : January 18th 2017

DAILY THOUGHT : A sickening attack yesterday in Bogota, images that reflect not only the pitiful levels that humanity can stoop to but also a graphic indication of despite the progress that Colombia has made over recent years this is still a country which has a violent streak running through it. It is irrelevant who is doing the killing, there needs to be a reckoning for all of those responsible for such acts, be the victims soldiers, policemen, social leaders or civilians, this simply has to stop, all victims are a tragedy but when they are only just embarking on adulthood it somehow feels even worse.

Some of the names that suffered worst on Wednesday were back to winning ways although the COLCAP itself had a quiet day closing marginally in positive territory (+0.01%) on total volume of USD27mn - the terrorist attack in the morning seemed to take the very air out of the market. In terms of performance moving ahead were CLH (+4.88%) ,CORFICOL (+3%) and PFGRUPOARGOS (+2.58%) whilst slipping were BOGOTA (-1.72%) ,PFAVAL(-0.93%) and ECOPETROL (-0.68%). The Peso gave up some of Wednesday's gains as it fell 0.48% to 3132.55 which given the outperfomance we saw was not a great surprise as the oil price remained close to unchanged, volume on the day a decent USD1.1bn.

The bond market saw increases along the curve with the benchmark 2024 rising 2.7bps to 6.177% whilst a the extremes we saw the 2020 (5.01%) up 2.5bps and the 2032 (7.19%) 1.4bps higher.

Recommendation : Neutral Price Target : 2,500

The company reported December and FY PAX numbers and whilst they are not directly comparable due to the industrial action taken in 2017 which has taken the company a long time to recover from. Overall the number (2.68mn) was up 5.9% YoY with the international sector (1.18mn) up 8.1% and the domestic business (1.5mn) also rising 4.2% - clearly the higher yielding international routes did well although once again in 2017 the company had reduced some capacity due to the strike. One potential concern during what is a key travel period will be the load factor of 82.2% which was actually down on December 2017 (83.1%) when the company was getting back on its feet, one potential explanation could be the tactics used by the airline during the strike trying to consolidate where possible two or three flights onto one or two. For the full year there was better news as they transported a total of 30.5mn, up 3.5mn (3.5%) from 2017 and whilst you might expect that due to the strike they are also treading up from 2016 which stood at 29.5mn.

Recommendation : Underweight Price Target : 2,800 In case you missed the separate note yesterday the Finance Minister said that he would be open to the sale of the 8.9% of Ecopetrol which has been on the shelf since 2011 when they sold 1.1% raising COP2.5bn (~USD780mn) - it has already been pre-approved by Congress since then and a successfully sale at market prices would be worth COP10.7bn (~USD3.34bn). The question is who would buy the shares in a company where 50% of analysts have a SELL recommendation and where the average 12m target price is COP3062 - 4.5% from where we are. The other limitation is that local AFPs in terms of equities are both close to their limits in equities overall and also in Ecopetrol given that their 10% limit includes both equities and bonds. Carrasquilla stated that it has to be discussed with President Duque but at this point one imagines it would need the type of deep discount that historically has been hard to attain when selling stakes in such public companies.

Recommendation : Neutral Price Target : 9,500 The stock was up on the day despite the fact that the Fiscal has summoned the two ex company VPs at the centre of the Maceo scandal (Édgar Ramírez Martínez & Camilo González Téllez) to discuss what they know. It is now well over two years since the scandal broke and whilst most analysts have stripped the Maceo project out of their valuations and despite the fact that it was the company themselves who highlighted the irregularities to the authorities which left the corporation themselves outside of the investigation there is still that creeping fear that at some point the company themselves will be dragged into the mire. The stock move is perhaps explainable by the fact that there is as of yet no new news and also the fact that the stock suddenly dropped 5% before the close on Wednesday.

We may not be into 'Mr Happy' territory but there was a better than expected recovery in Consumer Confidence in December according to Fedesarrollo. The -8.3% reading is still underwater however since June 2018 we had fallen from 15.50 to -19.60 and any movement upwards should be welcomed. The background to this move is relatively simple. In October and November when polled the cloud of the tax reform was hanging over consumers with many fearing a serious impact on their spending power - as December played out and the VAT extension was pared back along with many other proposals consumers became less concerned. Boring down into the details we find that in all five categories when polled there was a sizeable gap in a positive direction be it economic outlook or propensity to purchase durable goods.