The Global X MSCI Argentina ETF (NYSEArca: ARGT) is down just 6.6% year-to-date, a showing that is downright impressive relative to the other single-country exchange traded funds tracking Latin American economies.
However, that does mean it is time to buy Argentine equities or ARGT. Not with South America’s third-largest economy still grappling with an increasingly precarious financial situation. Last year, Argentina defaulted on its debt for the second time in 13 years.
“Argentina is headed for another collapse. The test for the next president will be how to juggle the economic adjustment while restoring institutional credibility and recovering a culture of tolerance,” reports the Wall Street Journal.
For close to two years, Argentina has been at odds with creditors, including some well-known U.S. hedge funds. Last year, the country offered “holders of its 7% Boden 2015 various options. They can either cash in at 97 cents on the dollar or swap into 8.75% Bonar 2024s at 99.70 for every 100 of the 2015s exchanged, plus accrued interest,” according to Reuters, a deal the country’s creditors are balking at.
Investors rejected that deal, which was not surprising because most debt swaps involve incentives for the creditor, but in this case, Argentina demanded a premium. [Argentina ETF Sees Big Inflows]
“…a recession, capital flight, double-digit inflation and gathering economic storms in the country’s two big export markets, Brazil and China … Kirchner’s successor will inherit an unsustainable fiscal deficit, a collapsing peso and the nation’s world-wide reputation as a deadbeat. Yet the vision of Mrs. Kirchner departing the Casa Rosada in December is producing a sense of relief that outweighs any potential catastrophe,” according to the Journal.
The government is allowing the market to adjust prices after spending billions of U.S. dollars to buffer the economy. The country’s foreign reserves have declined at a $1.1 billion per month rate over the past year and now sits at an eight-year low. [Argentina ETF Plagued by Peso Plunge]
Global X MSCI Argentina ETF
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.