Argentina could be headed for a massive bond restructuring, which puts its single country-focused ETFs on watch. Talks with the International Monetary Fund (IMF), its largest creditor, are expected to continue as a team of IMF economists are figuring out how to restructure about $44 billion in loans that Argentina is unable to pay back.
Investors will have to wait until Wednesday to see if the talks bear any fruit. Either way, the result could be sweet or sour.
“An IMF statement that supports a lenient restructuring offer would boost bondholder confidence,” said Mateo Reschini, a trader with Rosario-based brokerage LBO.
“But if the IMF sounds like it will not be flexible on collecting its own loans, it will be mayhem because that would mean Argentina would have to be even harsher in the restructuring of is privately held bonds,” Reschini said.
Per a Reuters report, the price of “Argentine bonds fell an average of 2% last week. With the government warning of a “deep restructuring” ahead, economists agreed prices still have room to move down depending on the signals that come from the IMF meetings.”
“The market is just as afraid of the IMF at this point as it is of the government,” Reschini added.
ETFs to watch include the Global X MSCI Argentina ETF (NYSEArca: ARGT) and the iShares MSCI Argentina and Global Exposure ETF (BATS: AGT). Traders could use the opportunity ahead of debt negotiations to buy-the-dip, but face the possibility of catching a falling knife.
ARGT seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Argentina 25/50 Index. The fund invests at least 80% of its total assets in the securities of the underlying index and in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) based on the securities in the underlying index. The underlying index is designed to represent the performance of the broad Argentina equity universe, while including a minimum number of constituents.
AGT seeks to track the investment results of the MSCI All Argentina 25/50 Index (the “underlying index”). The fund generally will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities of the underlying index. The index is designed to measure the broad Argentina equity universe, while including a minimum number of constituents, as defined by MSCI, Inc. (the “index provider” or “MSCI”).
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