Some of the world’s largest hedge funds are diving into Argentine stocks, and retail investors can also play the market through a country-specific exchange traded fund.
The Global X FTSE Argentina 20 ETF (NYSEArca: ARGT), which tracks the FTSE Argentina 20 Index comprised of the twenty largest and most liquid companies in the Argentine market, has increased 13.8% year-to-date.
Despite defaulting on its debt for the second time in 13 years, Argentina is attracting hedge funds like DE Shaw, George Soros’s family office, Third Point and Renaissance Technologies, the Financial Times reports.
According to regulatory filings, the hedge funds have acquired holdings in U.S.-listed Argentine shares, including YPF S.A. (NYSE: YPF), Petrobras Argentina, Telecom Argentina and Banco Frances.
The Global X FTSE Argentina ETF includes a heavy 12.6% tilt toward YPF, along with a 4.8% position in Telecom Argentina, 3.3% in Petrobras Argentina and 3.8% in Banco Frances.
Analysts argue that some investors are hopeful that a resolution to the complicated defaults could still be reached.
For instance, Dan Loeb, manager of Third Point, argues that we are seeing a “critical inflection point for the country.” [Latin America ETFs to Play Hedge Funder’s Picks]
“Argentina will regain access to global capital markets and solve its liquidity problem,” Loeb said, if the government settled with its holdout creditors.
Earlier this year, Michael Novogratz, president of Fortress Investments, suggested that Argentina was one of their countries seen as “so bad, they’re good,” pointing to a potential buying opportunity in the event of a default.
Meanwhile, credit agencies are less sanguine. For instance, Standard & Poor’s placed Argentina’s credit rating on “selective default” Wednesday after it failed to make a $539 million payment. ARGT will transition to an index from MSCI later this month.
Global X FTSE Argentina 20 ETF
For more information on Argentina, visit our Argentina category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.