COLCAP Drops After Tight Election Result

The MSCI COLCAP index fell 4.4% to close at 2,393 on June 22th, reversing part of its recent rally after one of the tightest presidential elections in Colombian history. Optimism following the victory of Abelardo de la Espriella faded as investors assessed the narrow margin of victory and the challenges it may pose for implementing market-friendly reforms. The right-wing outsider secured the presidency with a lead of roughly one percentage point over leftist Senator Iván Cepeda, disappointing investors who had hoped for a stronger mandate. De la Espriella has pledged to reduce Colombia’s widening budget deficit while supporting coal mining and oil drilling to strengthen fiscal revenues. Financial and energy stocks led losses, with Cibest down 5.3% and Ecopetrol plunging 8.5%.

Colombia's MSCI COLCAP index surged by nearly 7% to above the 2,320 mark on the first session of June, its highest since April, after rightwing populist outsider de la Espriella won the largest share of votes in the country's Presidential elections, setting up a run-off with leftist Cepeda, backed by outgoing President Petro. The result contrasted with polls that favored a leftist victory. Colombian equities tracked the surge for the peso and their sovereign bonds. Espriella had pledged to cut Colombia's growing budget deficit amid the country's increasingly tight public finances, with last year's shortfall coming at 6.4% of the GDP, a reason cited by the central bank to hold rates restrictive. At the same time, the candidate also pledged to back coal mining and oil drilling in Colombia, which face opposition from the incumbent government. Ecopetrol, the state oil company, surged over 8%.

COLCAP increased to an all-time high of 2424.00 Index Points. Over the past 4 weeks, Colombia Stock Exchange Stock Index gained 17.86%, and in the last 12 months, it increased 74.1%.