Sunrise Over El Dorado : Alianza : February 4th 2019

DAILY THOUGHT : Below is one of those pictures where if you squint your eyes and stare long enough you see something and if you stare long enough you can see the face of democracy, this is not the struggle as many contest against a totalitarian regime which just happens wear red shirts and claim to help everyone, it is a dictatorship which needs removal and just perhaps the end game is upon us however one fears that this cannot happen on peaceful terms.....

MARKETS

The COLCAP was back to winning ways on Friday (+1.04%) closing at 1462.03 driven by Corficol (6.74%), CemArgos (3.47%) & Davivienda (2.92%) - a couple of the stocks didn't get the memo including Celsia (-0.58%) & BVC (-0.34&%) but overall a satisfactory start to February - given the good day on the Peso that puts Colombia up 16.07% dollar terms YTD, Brazil which was going to be the absolute darling of 2019 is up 18.17%. Total volume on the day a slightly disappointing USD36.2mn of which 14% was on margin.

The PESO had another good day on Friday closing 0.49% stronger at 3089.9 the high point of the day - volume of the day was the new average of USD 1.15bn

A mixed bag on the bond market as yields rose in most cases after Thursday's's big day - the 2026 (6.56%) rose 6.5bps whilst the 2032 was up 1.8bps at 7.028% - the exception was the benchmark 2024 which fell marginally to close at 6.03%.

For those who missed the news last week EPM have announced the starting date for the sale process of ~10% of ISA that they own, this equates to 112,605,547 shares which at the offer price of COP13,750 is worth COP1.5bn (USD500mn). The offer price is at 1.2% and the maximum amount of shares that can be acquired in Round 1 (see below) is 1,107,677 (USD5mn) however given that the AFPs have multiple funds and the appetite at this price we could be looking at USD50mn. Round 1 will begin on February 4th and run for two months however at this stage the public may not participate only AFP's, Employees and Ex-Employees etc. For those discussing a sale process for Ecopetrol the price here is worth noting, the common consensus is that to sell close to 9% of the oil company it would need to be at a healthy discount - in the case of ISA it is 1.2% which highlights the difficulty of selling mixed public and private assets. Clearly an issue for ISA in the short to medium term will be the stock overhang.

PMI The Manufacturing index is still a relatively new concept with just 25 months of data however the reading for last month, January, indicates a recovery from 2018 however with the enormous caveat that January 2018 was a poor reading and we are still well below January 2017 which was below the economy slowed down. The readings for 2018 were consistently much higher than 2017 and this makes 12 consecutive months of YoY gains.