Saying Latin American equities and the corresponding exchange traded funds are having a rough go of things to understate the situation.
Earlier this week, a glum technical situation was highlighted in the iShares Latin American 40 ETF (NYSEArca: ILF), that being ILF trading at its weakest levels relative to the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) since 2005. [LatAm ETFs Lag Emerging Markets Benchmarks]
ILF hit a new 52-week on Wednesday. So did the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) and the iShares MSCI Mexico Capped ETF (NYSEArca: EWW), two ETFs tracking countries that combine for over 80% of ILF’s geographic. Imagine if ILF featured Argentina exposure.
Mercifully, ILF does not hold Argentine equities. Mercifully because the Global X MSCI Argentina ETF (NYSEArca: ARGT) has plunged 5.6% over the past week and 14.6% over the past 90 days. ARGT’s three-month slide is 345 basis points worse than that of the iShares MSCI Frontier 100 ETF (NYSEArca: FM), an ETF that allocates 11.5% of its weight to Argentina, over the same period. [Oil Plagues Frontier ETFs]
ARGT’s 5.6% loss over the past five days is not even half as bad as the 13% drop for the benchmark Merval index over the same time frame.
“Investors are losing faith that the current administration will settle with holdout bondholders — “vultures” as President Fernandez calls them — in 2015. That’s when a clause in their bond contract that the Argentine government says prohibits them from negotiating with the holdouts, the RUFO (Rights Upon Future Offers) clause, expires,” reports Business Insider.