No Latin American market has been as affected by the surprising election of Donald Trump as the 45th president of the U.S. than Mexico. However, Argentina, South America’s third-largest economy, is being affected as well.
Home to one of the world’s best-performing equity markets through much of 2016, Argentina saw its financial markets tumble last week in the wake of Trump’s stunning victory. The Global X MSCI Argentina ETF (NYSEArca: ARGT), the lone exchange traded fund tracking stocks in Argentina, slid more than 5% last week.
This latest for Argentine equities and ARGT come after a period of ebullience on the back of what was seen as a favorable domestic political environment. Market observers seem inclined to wager that Argentina’s newly elected Mauricio Macri could mean big changes in the economy after years of tepid growth. The pro-market Macri has pledged to quickly reverse much of the previous heavy-handed economic policies and open up the economy that has been posting back-to-back years of near stagnate growth, Bloomberg reports.
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In the 14 years after Argentina carried out the world’s largest default, the Nestor Kirchner and Cristina Kirchner implemented a number of outdated policies, including a heavily regulated foreign-exchange system, seizure of privately-owned assets and under-reported inflation.
After years in capital markets purgatory, some market observers Trump’s victory here in the U.S. could pinch recovering Argentina.
“Yields on the nation’s dollar-denominated bonds due in 2046 have surged about a half-percentage point to 7.4 percent since the Nov. 8 vote, and may rise to 8 percent, according to Walter Stoeppelwerth, chief investment officer at Balanz Capital. That would be the highest since President Mauricio Macri settled a bitter feud with holdouts from Argentina’s 2001 default in April,” reports Charlie Devereux for Bloomberg.
[related_stories]Argentina’s foreign reserves are at nine-year lows. Prices on the country’s commodity exports are down. The budget deficit is at its widest in three decades. Inflation is running at an annual pace of over 20%. Still, this is South America’s third-largest economy and home to abundant natural resources, levering the country to the rebounding commodities trade.
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“In his first year in office, Macri is seeking to revive the economy, slow inflation that’s skyrocketed to 47 percent and strengthen the nation’s finances. A cornerstone of his plan is $35 billion in infrastructure spending next year that he says will kickstart growth,” according to Bloomberg.
Even with last week’s slide, ARGT is still up 24% year-to-date.
Global X MSCI Argentina ETF
