The Santiago stock exchange began trading up 9.25 percent on Monday morning, after far-right candidate José Antonio Kast emerged as the frontrunner in the country’s presidential race. Mr. Kast finished in first place with 28 percent of votes, beating leftist option Gabriel Boric, with whom he will face off in a December runoff.
Even though it pared some gains during the day, the IPSA index is on its way to posting the biggest daily rise since March 2020, and reaching its highest overall level since May 2021. The Chilean Peso is also seeing improvement, jumping 3.5 percent to CLP 800 : USD 1, making it one of the world’s best-performing currencies today.
While Mr. Kast and his runoff opponent are on opposite sides in terms of politics and economy, investors believe both will have to tilt to the center to appeal to moderate voters before the December 19 run-off. Voting data from Santiago’s so-called “Sanhattan” financial district, however, does not hide markets’ preference for the far-right Mr. Kast, who is seen as someone who would stick to Chile’s long-held neoliberal economic model.
Still, the runoff scenario “would not be enough to eliminate political uncertainty, in our view, as Chile is going through potentially structural changes,” said Credicorp Capital’s Senior Economist, Samuel Carrasco, speaking to La Tercera newspaper.
Following the October 2019 protest movement and the process of drafting a new constitution, the eventual winner is expected to promote changes in key aspects of the economy such as the health system or pension funds system, which can bring volatility to assets in the foreseeable future.
In this sense, BTG Pactual’s analysts note that the recovery of seats by the right in Congress “might indicate more difficulty for the approval of reforms requested by the [constituent] assembly.”
For the upcoming four weeks, the bank’s team expects a moderate rally in assets that have been hit the hardest by the electoral campaign, such as forest products – which might be subject to tougher regulations under Mr. Boric — utilities, and consumer goods.