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The main stock market indicator, the S&P IPSA, rose 9.69%. The dollar closed at $ 812.90 after losing $ 19.80.

The results of the first presidential round were received with marked optimism by the Chilean market. Yesterday, the S&P IPSA registered a rise of 9.69% to 4,780.91 points, the highest level reached by the indicator since April 26 of this year.

The victory in the first round of the candidate of the Christian Social Front, José Antonio Kast, who has a government program more akin to the market than his contender for Approve Dignity, Gabriel Boric, generated the largest daily percentage increase since October 13, 2008, that is, 13 years.

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Likewise, the results in Congress also motivated investors, above all, by the reordering of forces in the Senate.

Thus, the IPSA accumulates gains of 16.83% in November, aiming to close its best month since January 1994.

The head of the portfolio of Vector Capital, Rodrigo Castro, explains that the momentum of the stock market is mainly due to the result of the parliamentarians, since “in the face of radical changes that they want to make, legislators will have to negotiate and reach agreements and consensus , giving a better scenario for investors and removing uncertainty from the market. “

Regarding the second round, the Renta4 studies manager, Guillermo Araya, affirms that the IPSA will have already incorporated the best scenario for the market, where Kast is in the first position to win the ballot, considering that from 1999 onwards the candidate who wins the first presidential round wins in the second round.

“We estimate that the IPSA is going to move in a lateral channel between 4,500 and 4,700 while waiting for the second round,” says Araya.

Likewise, the ADRs of the main issuers of the Chilean stock market that are listed in the US stood out on the day with the majority trading higher. Itaú gained 14.57%, followed by SQM-B and Enel Chile with 12.35% and 11.11%, each.

“On Monday after the elections, foreigners maintained a buying bias, but to this was added a greater appetite for shares on the part of the retail investor,” says Credicorp Capital’s research director, Carolina Ratto.

Respite to the dollar and country risk

At the foreign exchange level, the market also reacted strongly to the electoral results. In the first hours of the session, the dollar fell more than $ 30 due to the greater strength of the Chilean peso.

But as the hours passed, it moderated its trend to close at $ 812.90, registering a decline of $ 19.80, according to Bloomberg. This was the largest decline since November 2019.

Thus, the Chilean peso ranked as the currency with the best daily performance among emerging currencies and third at the international level.

For their part, Credit Default Swaps (CDS) -which measure the risks of default for Chilean sovereign papers- showed setbacks, given a more optimistic outlook for the right in Chile.

Five-year CDS fell 6.58%, reaching 86.15 points. Meanwhile, at 10 years, the drop was 2.25% to 144.14.

“For now, the reaction is favorable and that implies that they see a better scenario than the previous week. However, they will look for greater signs to maintain optimism, since the challenges of the next government continue to be important, both at the level of fiscal balance and covering the greater needs of social spending “, says the portfolio manager of local stocks of Zurich AGF, Andrés Galarce.

Impact on rates

The election results also affected the local bond market. In UF papers there was a fall of 0.01 basis points, which left the BCU at five years at 1.98%, while at 10 years they did so at 2.23%. On the other hand, the five-year and 10-year BCP increased by 0.05 points to 5.70% and 6.03%, respectively.

Analysts at Julius Baer said CDS and implicit bond ratings have already discounted the risk of a downgrade, although they expect volatility to continue after the election.

“Regardless of who wins the presidency next month, Chile is poised for a deterioration in its fiscal metrics, as in most candidate plans, spending will rise faster than government revenue through taxes, thus smoothing out the way to increase the debt / GDP “, they indicate.

“The current environment does not seem attractive to us when it comes to Chilean sovereign bonds.

We expect volatility to increase in the local stock market over the next month, “they add.

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