Chavez ‘Likely’ to Lose, Supporting Bonds, Barclays Says

Chavez ‘Likely’ to Lose, Supporting Bond Position, Barclays Says
Henrique Capriles Radonski’s lead grew to almost 5 percentage points in a poll by Consultores 21, with 51.8 percent of Venezuelans who said they’re sure to vote saying they’d vote for the opposition candidate. Photographer: Eitan Abramovich/AFP via Bloomberg

Venezuelan President Hugo Chavez will “likely” lose this weekend’s election, sparking a bond rally, Barclays Plc said after a poll showed opposition candidate Henrique Capriles Radonski widened his lead.

Capriles’s lead grew to almost 5 percentage points in a poll by Consultores 21, with 51.8 percent of Venezuelans who said they’re sure to vote saying they support the opposition candidate, the Caracas-based polling company said yesterday. Chavez had the support of 47.2 percent. The poll of 1,546 people taken between Sept. 27 and Oct. 2 had a margin of error of 2.5 percentage points.

“Taking into account the Consultores 21 poll and Mr. Capriles’ momentum, an opposition victory looks likely,” Barclays analysts Alejandro Arreaza and Alejandro Grisanti wrote in a research note today. “An opposition victory could be a positive surprise for the market that could push Venezuelan assets to levels not seen in the past five years.”

Barclays maintained its recommendation that investors buy bonds from the Venezuelan government and state-run oil company Petroleos de Venezuela SA.

Benchmark bonds due in 2027 rallied, sending the yield down 13 basis points, or 0.13 percentage point, to 10.39 percent as of 10:58 a.m. New York time, according to data compiled by Bloomberg. The country’s dollar bonds returned 30 percent on average this year through yesterday as Chavez’s battle against cancer fueled speculation that his time in power may be nearing an end, making them best performers after Ivory Coast debt in JPMorgan Chase & Co.’s EMBI Global Index.

Polls Split

Chavez, a former paratrooper and a self-claimed socialist, has nationalized everything from utilities to banks to steel companies since coming to power in 1999, leading to a drop in investment from foreign and local companies. Capriles, a 40-year-old lawyer, is promising to dismantle Chavez’s economic policies, including currency and price controls that have created food shortages and failed to contain the world’s third-highest inflation rate.

With two days before the election, polls are still split on who is leading the race. A Datanalisis poll from Aug. 25 through Sept. 5 of 1,600 people who said they’re certain to vote showed Chavez led Capriles by 10.4 percentage points.

Barclays’s trading recommendation stands in contrast with Bank of America Corp. and JPMorgan Chase & Co.

Bank of America analyst Francisco Rodriguez said today that Chavez still has an edge before the election and will probably win by five to eight percentage points. JPMorgan cut Venezuelan bonds to the equivalent of hold on Sept. 17, saying that the securities were “adequately” priced after the rally this year.

Barclays’ analysts said Caracas-based Consultores 21 has been accurate in forecasting the recent election results in Venezuela, saying the firm has a “a long track record” of predicting both the winner and also the margin of victory.

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