Venezuela's Caracas Stock Exchange rises nearly 50% in one day: Here's why

Venezuela's Caracas Stock Exchange rises 50% in one day: Here's why

• Caracas Stock Exchange surged 74% after US raid and Maduro's capture
• Investor optimism driven by hopes for sanctions relief and economic revival
• Venezuelan bonds rallied on regime change hopes and possible debt restructuring

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Venezuela's Caracas Stock Exchange rose nearly a whopping 50% on January 6, days after the US staged a covert raid to oust Venezuela President Nicolas Maduro.

Venezuela's stock market has risen 74% since President Maduro was captured.

Since December 23, as US President Donald Trump ramped up pressure on Maduro's government, Venezuela's stock market surged 148%.

The Caracas Stock Exchange's IBC index rose from 2,231 on January 2 to 3,897 by January 6, a 74.68% increase, driven by investor optimism for sanctions relief and economic revival.

It needs to be noted that much of the ownership of the Bolsa de Valores de Caracas (BVC Venezuela Stock Exchange) stocks are held by local banks, financial institutions, and wealthy domestic investors rather than diverse public float. It’s very low liquidity too.

Some reasons for this rally are: Venezuela might get sanctions relief, global investments might happen in the South American country, economic growth is likely under US control, political stability.

The magnitude of the move suggests investors are interpreting recent developments as a potentially constructive shift for Venezuela’s political and economic outlook.

Bolsa de Valores de Caracas (BVC), founded in 1947, in reality, trading covers about 15 companies. This is the smallest stock exchange in South America. Trading volumes did not exceed $1 million per day last year.

The sudden rush of interest to invest in Venezuela after the removal of Nicolas Maduro is “ridiculous” and no meaningful opportunities will arise until the restoration of democracy and rule of law, according to the chief executive officer of CV Advisors.

“Everybody and their mother is calling their financial adviser, is calling their family office on ‘where do we invest? How do we take advantage of this? You’re from Venezuela, can you look for assets there?’” Elliot Dornbusch said in an interview. “I’m like, are you nuts?”

The US government’s removal of Maduro and vow to work with remaining elements of the Venezuelan regime while promoting investments into the oil industry won’t work or help usher in more prosperity for the country, Dornbusch wrote in a letter to his investors seen by Bloomberg on Tuesday. “Political transition must come first,” he wrote.

Venezuelan sovereign and state-run oil company PDVSA bonds have rallied on hopes of regime change and debt restructuring after Maduro’s capture.

Prices of defaulted Venezuelan sovereign bonds and notes issued by state oil firm PDVSA have already more than doubled in recent months, rising to about 23–33 cents on the dollar as US President Donald Trump intensified pressure on Maduro. Although still a distant possibility, investors said the chance of a future debt restructuring, a crucial step to attract fresh capital, could push recovery values higher, potentially into the 50–60 cent range, Reuters reported on January 5.

Trump said Venezuela would relinquish as much as 50 million barrels of oil to the US, worth roughly $2.8 billion at the current market price, announcing the cargoes would be sold with proceeds benefiting both countries.

The announcement late on Tuesday, which came with few details, marked a significant step up for the US government as it seeks to extend its economic influence in Venezuela and beyond after the capture of leader Nicolas Maduro over the weekend. It’s also a blow to China, previously the top buyer of the country’s oil and a close partner.

The volumes cited by Trump would represent about 30 to 50 days of Venezuelan oil production before the US’s partial blockade of the country — much reduced from historic levels. West Texas Intermediate, the US oil benchmark, fell as much as 2.4% after Trump’s comments and is currently trading at close to $56.40 a barrel.