Its a paradox of sorts that is playing out in Venezuela. On the one hand the political uncertainty continues after the US President Donald Trump captured Maduro. But on the other hand, Caracas stock market had a stupendous rally in the last few weeks, up over 150% in last 1 month. Renowned fund manager Mark Mobius believes that “Venezuela” as a market is “Worth Watching Again.”
In a post on social media platform X (formerly Twitter) said that the market is attractive, since hyperinflation and currency collapse have caused Venezuelans to look to the stock market as a way to retain asset value. The result has been that the Caracas Stock Exchange main index has shown massive gains in bolívars, especially during the hyperinflation years, with triple-digit or even four-digit percentage moves.
“We would like to re-enter the Venezuelan stock market, but a number of hurdles will first need to be surmounted,” he said.
Mobius says, ‘Trump reshaping global order’
Mobius stated that Trump is reshaping the global order with his actions in Venezuela, which have significant implications for investors. Further, he said that they “were invested in Venezuelan company shares, but we exited as soon as Chávez announced plans to nationalise companies.”
Hugo Chávez was the populist socialist President of Venezuela from 1999 until his death in 2013. He was known for his ‘Bolivarian Revolution,’ anti-US stance, and extensive social programs funded by oil wealth.
Chávez, the cobblestone
For Mobius, after Chávez took over, it was a no-go zone. However, Maduro’s exit brings a new opportunity for the fund manager. Now, a new political and economic order could be in sight, and the country could be reopening to investors.
Before Chávez came to power, Venezuela produced around 3 million barrels per day. As of now, it is producing less than 1 million barrels per day, compared with Saudi Arabia’s roughly 8 million barrels per day.
Problems that needs to be deal with
Capital controls, which make it impossible to move money in and out of the country, will need to be changed. Custodial banking facilities will need to be established. No foreign banks are keen to set up such facilities, given the risks involved.
With extreme inflation and a collapsing currency, equities have become a “store of value” relative to rapidly depreciating bolívar cash. In some periods, those gains have been strong enough to translate into US dollar returns.
How will US boost optimism for investors?
Holders of Venezuelan debt may find reasons for optimism. A potential easing of US sanctions could allow the long-stalled restructuring of PDVSA (the Venezuelan state oil company) debt, which has been in default since 2017.
External liabilities are about $160 billion, of which about $145 billion is in bonds and the rest in bilateral loans. In early January, Venezuelan bonds surged sharply after news broke of Maduro’s exit and renewed investor hopes of political change. CITGO, PDVSA’s US-based refining arm, is at the centre of creditor lawsuits and recovery value, since there are CITCO assets in the US.
Who is Mark Mobius?
Mark Mobius is a renowned American-born German fund manager, author, and investor. He is famous as a pioneer in emerging markets investing, often called the “Indiana Jones of Emerging Markets,” known for his long career at Franklin Templeton Investments and founding Mobius Capital Partners.