Up 36% year-to-date, the Global X MSCI Argentina ETF (NYSEArca: ARGT) is one of this year’s best-performing single-country ETFs. Data suggest investors have recently been renewing their interest in ARGT, the largest of the two ETFs dedicated to Argentine equities.
Earlier this year, investors piled into ARGT, betting that index provider MSCI would promote the country to the widely followed MSCI Emerging Markets Index from the frontier markets classification. However, MSCI delayed that promotion, a move that sent some investors scampering out of the Argentina ETF.
A new catalyst is on the horizon. This weekend, Argentina holds mid-term elections, which some market observers believe will be an opportunity for President Mauricio Macri to move forward with his pro-markets agenda.
Market observers seem inclined to wager that Argentina’s President 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.
“Investors are raising their exposure to Argentina ahead of Sunday’s midterm elections. Bets are increasing that President Mauricio Macri will be able to push ahead with his pro-business reform agenda,” reports Bloomberg.
The $171.1 million ARGT held 25 stocks at the end of the second quarter, half of which were energy or technology names. ARGT allocates a combined 24.5% of its weight to financial services and consumer staples stocks.
Related: Risk & Reward With the Argentina ETF
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.
ARGT “is headed for the most inflows in six months ahead of legislative elections as polls suggest Macri’s candidates are leading. The added exposure comes as local stocks approach record highs after gaining 43 percent in dollar terms this year, raising alarms that the market may be overheated and a sell-off near,” according to Bloomberg.
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