Sunrise Over El Dorado : Alianza : January 31st 2019

DAILY THOUGHT : What difference would 5000 US soldiers make even if they did come to guard the Venezuelan border ? At over 2000km it would place one soldier every 400 meters - Colombia already has a standing army of close to 300,000 soldiers most of which are highly experienced - all starting to feel very 1962.....

A 10th day on the rise as the COLCAP closed 0.85% higher at 1449.65, volume was average at USD41mn with 15% of that generated by the closing auction. Amongst that volume the most traded names were ECOPETROL (USD 9mn),CEMARGOS (USD 7mn) and PFBCOLOM (USD 4mn). In terms of performance PFCEMARGOS (+4.53%), CORFICOLF (+3.62%) and NUTRESA (USD 3.45%) all fared well whilst CONCRETO (-6.54%) ,GRUPOAVAL (-3.07%) and PFAVAH (-1.37%) underperformed.

*On Tuesday EPM 's board agreed to sell the 10% stake they have in ISA - they anticipate the process finishing in Q319* *Yesterday the Secretary of Finance for Bogota said they have no immediate plans to sell the balance of 9.4% of EEB they failed to place last time around - they will analyse market conditions* The PESO again fell, this time by 0.29% to 3163.2 and unlike the equity market simply can't find a bid at this juncture - volume on the day was USD1.11bn.

On the other hand the bond market continues to strengthen albeit modestly yesterday with the benchmark 2024 1bp lower at 6.11% and the 2032 1.1bp stronger at 7.129%.

At the beginning of 2018 the DANE, a most excellent source of all things macro, began to publish data on fifteen separate sectors of the service industry and in keeping with much of the commercial area in Colombia the numbers are improving - arguably the flaw in the data is that it is presented per sub-sector as opposed to on a consolidated basis. Looking at November we find that 13/15 sub-sectors had a positive month in terms of nominal income led by Real Estate (+16%), Systems & Data (15.9%) & 'Other Services' (13.5%) - the only two that were somewhat treading water were Telco (-2%) & Transmission/News (-5.4%). When we look at the data in terms of numbers employed we find Systems & Data (+10.8%) & Publicity (+7.5%) are the two big winners whilst the same Telco (-1.6%) & Transmission/News (-2.4%) are amongst those shedding jobs. Looking briefly at the YTD numbers we find that of the 15 categories only Transmission/News (0.2%) is in negative territory during 2019 - leading the growth this year have been Science & Technology (+12.5%), Cinematography (+12%) & Systems & Data (+11%). Colombia is fast becoming a service hub, its proficiency in new technologies highlighted by last week's WEF decision to position Medellin as the 4th Industrial Revolution hub for Latam and additionally services such as call-centers have been highly interested in the country due its geographic location and 'neutral' Spanish.

The Central Bank will sit down today but in the time it takes to order the tea and biscuits the decision should be made, there is little or no reason to expect any change to the 4.25% either today or over the next few months. Along with consensus we are looking at a first rate hike in April but unlike consensus (4.75%) we are expecting a 2019 exit rate of 5.25%. Of more interest today will be the press conference where both committee Chairman Echavarria and FinMin Carrasquilla are likely to be quizzed on a host of matters and they may have further comments of the dollar purchase program.

Today we will see the latest unemployment numbers for December and whilst the Urban estimate of 10% is the highest reading for that month since 2012, the macro data for November has suggested an economic acceleration - of that continued into December the number might be better than expected.

The last cement data for 2018 is in and there was some better news after what can only be described as a year to forget - production rose 6.8% to 1,089,400 tons whilst Dispatches grew 2.6% to 973,400 tons, not as impressive a number but anything in positive territory is welcome. Looking back on 2018 as whole it was a year in the doldrums for the sector as the 4G projects whilst underway have yet to reach the stage where the cement and concrete is being poured in great amounts - 2019 should be the year when that dynamic changes. Total production in 2018 amounted to 12.45 million tons which was an increase of just 1.3% whilst dispatches totaled 12.01 million which represented an improvement of just 0.2%.