Venezuela Bursatil Caracas IBC IBVC:IND close August 25th, 2017: 203.086

Weekly chart of the Caracas stock exchange index with a medium / long-term bullish trend and a volatility stop highlighted but not activated.

InchCapital Platform – Data Source Datalink

 

Exactly three years ago the Caracas Stock Exchange Index IBVC: IND (Bloomberg code) quoted 2623 (closing of 2014/08/29). At the end of these last thirty-six months, the percentage increase was an extraordinary 7.742%, representing one of the most important historical performance of the financial markets. However, not all that glitter is gold.

We have to analyze the performance of the index with regard to the risk of change (depreciation of Venezuelan bolivar versus USD), and for the particular historical moment highlighted by the country risk. Foreign exchange risk that rises to the Country risk, which in turn adds to the risk of illiquidity of equity investment in the Caracas market representing only ten equities.

 

The chart shows the trends of Black Market and Official Rate of the Bolivar vs. USD in the last four years. It points out that in reality the Venezuelan currency depreciated by about six times more than what is officially declared.

 

By qualitatively analyzing this performance, recorded, in the last three years in the light of the trend recorded by the Venezuelan Bolivar vs. USD, you will notice immediately that the miraculous increase of the Caracas stock index really does not exist, especially if you consider the trend that has stood out in the black market. First of all a black market regarding the official currency is a typical structural risk of one nation.

In these last three years, the depreciation of the local currency exceeded 10.000% against the dollar and even more vs. euro. Everybody can immediately understand how the performance of the Caracas index, fueled by the pursuit of an entire country to take refuge in the real economy, to avoid the overwhelming depreciation of the currency is actually fictitious. The numbers often deceive if not appropriately considered in absolute, relative and comparative terms.

 

The chart obtained from the InchCapital platform highlights the performance of the Venezuela Bond 7% expiration date on 03/31/2038 - in USD currency with a bearish medium / long-term trend.

InchCapital Platform – Data Source Fida

 

However, is Venezuela one country too risky to make investments? The answer is not because Venezuela has unexpressed potentials that are represented not only by the reserves of precious minerals not yet extracted and therefore not only oil but also and above all by the brilliant ruling class that will have the opportunity to affirm once resolved, in a democratic Political way the current moment of crisis.

In this regard, we will follow, as the country benchmark, the Venezuela Republic bond 7% expiration date 31.03.2038 isin code USP97475AJ95 currency in USD. In the last three years, as you can see from the chart on the left, it seems that the worst country risk has already passed: you just have to wait for a purchase signal.

The last closing on Friday, 2017/08/25, was recorded at 37.14 and we have to wait just only one close weekly above 39.72 (weekly adjustable level).