June concludes and with it the first semester of a complex 2022 for the world markets. The war in Ukraine, its inflationary consequences, and the risks of a recession in the United States, have ended up generating fear among global investors who seek to get out of riskier assets to find refuge. And in Chile, added to all of the above, internal political noise has also helped to collapse the peso and take the dollar to record highs.
In fact, at the end of the semester the US currency closed at $920.3, down $5.35 from the previous day, although the day was again marked by high volatility. The currency was quoted in the morning hours at $939.
With the closing data for the day, the dollar added a rise of $95.9 in the month, its highest monthly rise since October 2008 (in the midst of the subprime crisis). In turn, the latter implies that in June, the Chilean peso was the second worst-performing currency globally.
In the semester, the dollar rises above $67.8, adding three of these consecutive upward periods. Likewise, as of June, the peso is the second most devalued currency in the region: the Argentine peso lost 17.95%, the Chilean 7.2% and the Colombian 1.8%, while the Brazilian real rose 6.2%, the Peruvian sol 4.57% and the Mexican peso 2.08%.
Martina Ogaz, an economist at EuroAmerica, comments that given the international situation, “the appetite for risk has decreased and has led investors to once again take refuge in less risky assets, one of them being the dollar, which at the multilateral level has strengthened against a number of currencies. This explains why a large part of the currencies weaken against the dollar and in particular currencies of emerging economies such as the peso”.
Marco Correa, chief economist at Bice Investments, points out that although a large part of the behavior would be explained by the deterioration of international fundamentals, “In recent days this weakening has been exacerbated, which could be explained by a greater fear of local investors, who have increased their demand for the dollar, even being willing to pay a premium for higher risk.”
One of those fundamentals in the price of copper, which closed this Thursday at US$ 3.7399 per pound, its lowest level since the beginning of September 2021, after recording a drop of 2.38%.
In the month, the red metal accumulates a drop of 13.22%, its worst monthly performance since the end of March 2020. Meanwhile, in the year it adds a decrease of 14.9%, its worst half-year result since that registered in the second half of 2015.
However, not all raw materials have been affected. And it is that while copper is the victim of fears of a recession that could reduce its demand, oil continues to be pushed up by the conflict between Russia and Ukraine.
Thus, the WTI -reference for Chile- quoted at US$ 105.85 per barrel, accumulating in the semester a rise of 40.91% its highest six-monthly rise since the first half of 2021 (51.42%) Brent oil, meanwhile, is at US$114.81, a six-monthly increase of 47.6%, the highest since the first half of 2009.
Oil prices are expected to stay above $100 a barrel this year as Europe and other regions struggle to decouple from Russian supplies, a Archyde.com poll showed on Thursday, though economic risks could slow market rises.
A Archyde.com poll of 34 economists and analysts forecast Brent crude to average $106.82 a barrel in 2022, the highest estimate for the year so far, versus a consensus of $101.89 in May.
Analysts projected demand growth of around 2.3 to 5 million barrels per day (bpd) this year and 2 to 2.4 million bpd in 2023, as tight supply is offsetting any fears in around consumption.
“Concerns about demand destruction amid the stagflation trend and China’s COVID lockdowns capped optimism in the recent past, but as China eases restrictions, demand could pick up again in the third quarter. ”, said Suvro Sarkar, an analyst at DBS Bank.
But the dollar is not the only currency that appreciates against the Chilean peso. The euro has also not stopped rising against the national currency and is fast approaching all-time highs. The European currency, in fact, climbed almost $84 in the month, closing June with its biggest monthly rise since the same month in 2008.
The community currency ended the session at $967.68 and has risen in 10 of the last 11 sessions against the Chilean peso, according to data from Bloomberg. And although it is still a long way from reaching the record of $988.94 reached on December 20, it broke the $1,000 barrier at exchange houses in the center of the capital.
“Every year they bring us surprises. This 2022 the war, more persistent inflation that is forcing the Fed to prioritize price controls over growth and the new quarantines in China have led the international issue”, summarizes Klaus Kaempfe, regional director of Portafolio Solutions of Credicorp Capital.
In terms of stock markets, in the semester the MSCI World index fell 21.21%, its worst six-month performance since December 2008.
And in the US, faced with the risk of a recession, the data is no more optimistic. The Dow Jones fell 15.31% between January and June, the biggest semiannual drop since December 2008, as did the S&P500, which lost 20.58% in the same period. Mind you, this was the worst first half since 1970 for the S&P.
In local equities, says Kaempfe, “we expected a good start to the year and this happened that way, but the chances of a recession and the closures in China have momentarily hit the IPSA”, which reached 5,387.06 points, but today it closed below 5,000, at 4,950.39 points.
Javier Pizarro, manager of Research Banchile Inversiones, maintains that “The performance of the IPSA has stood out compared to its peers, mainly for two reasons. The first is the continuous increase in earnings expectations of Chilean companies in recent months, while the second is the very low level of valuation with which the year began, at which time it presented a significant penalty, while other markets They reached their maximum.
All in all, in the semester the selective -measured in dollars- is the seventh stock market that has risen the most in the world, with a yield of 6%, although it is largely due to the 75.9% jump of SQM, whose weighting in the IPSA exceeds 10%.