Ecopetrol Shares Led the Stock Market Decline, with a Drop of 11.92%

On June 21st, the Colombian Stock Exchange (BVC) was stained in red, with a fall of 3.82% in the Msci Colcap, which closed at 1,398.42 points.

In total, 28 issuers fell in the local stock market, and it was precisely the share of the national oil company, Ecopetrol, which suffered the most from last Sunday’s election results when it was known that Gustavo Petro will be the president of Colombia in the next four-year term.

The company’s shares fell 11.92% on the BVC, reaching $2,431; and its ADR on the New York Stock Exchange (Nyse) fell 11%, while its international peers, such as Chevron Corp (4.24%) and ExxonMobil (6.26%), grew in the US market, as crude oil prices increased. At the close of this edition, the Brent oil barrel, reference for Colombia, rose 0.70% to US$114.93; while the West Texas Intermediate (WTI) rose 0.99% to US$110.65.

“The stock experienced a significant setback, reacting to the election of the new president and, particularly, to his proposals regarding the oil industry in Colombia. The uncertainty generated by the change in the economic system, which threatens the extractive industry, led investors to reduce their positions in the asset until more information is known about the intentions of the new administration on this issue,” indicated Sharon Vargas, portfolio analyst for Itaú Comisionista de Bolsa.

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In fact, in an Inside LR, Ecopetrol’s president, Felipe Bayón, reiterated the importance of being self-sustainable in terms of energy

“If I don’t have those resources and I have to import fuels, how can I tell Colombians not to use motorcycles, for example. The transition is going to take some time, the technology is going to get there, but we have to do it in an orderly manner,” he said.

After the national oil company, the shares that fell the most during the day this Tuesday were the preferred stock of Bbva Colombia (-10.26%), Enka (-9.09%), Mineros (-7.31%), Éxito (-7.26%) and the preferred stock of Grupo Argos (-6.92%).

“A negative behavior of Colombian stocks, a rise in the dollar, and an increase in TES rates were expected, taking into account that a pro-market candidate did not win,” explained Omar Suárez, director of equity strategy for Casa de Bolsa.

According to the expert, the movement of the local stock market will depend on whether the president-elect, Gustavo Petro, will moderate his speech, in addition to who will be the names in cabinet. “In the medium term, the movement will depend on whether the promises that were said will be fulfilled, whether the speech will be moderated, and how easy it will be to approve the most radical proposals, which the market is most concerned about. The Minister of Finance will play a fundamental role to reassure or generate concern”, said Suarez.

Effects on the dollar if exploration is halted

A study conducted by Corficolombiana analyzed Gustavo Petro’s proposal to suspend the signing of new hydrocarbon exploration contracts. Said entity foresees that the macroeconomic effects would be drastic and immediate on the exchange rate and the trade balance.

“In 2027, the devaluation of the nominal exchange rate would be between 39.9% and 43.7%, which implies that the dollar would trade between $5,080 and $7,020; while the trade deficit of goods would increase between 15.4% and 38.6%; and the value of imports would contract between 4.8% and 8.9%”, concludes the analysis.

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(Featured image by 3844328 via Pixabay)

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