Argentina Special— in the midst of the storm, shock primary result for bondholders, and everyone’s crying for you
Here are the top 3 insights for August 16th.
- Pictet: Argentina — in the midst of the storm
- Investec: What Argentina’s shock primary result means for bondholders
- Vontobel: Everyone’s crying for you, Argentina
- Battered by record-high inflation and interest rates, Argentina has been suffering since early 2018.
- Upcoming elections add to the uncertainty.
- The Argentine peso has depreciated to the extent that one US dollar is now over twice the price it was one year ago.
- In a deep recession since early 2018, the country’s economy shrank by 2.5 per cent in 2018, with expectations for 2019 now standing at -1 per cent at best.
Genuine Scores for the top 3 Argentina focused Funds:
- Global X MSCI Argentina ETF, 33
- iShares MSCI Argentina and Global Exposure ETF, 30
- Highland Argentina Regional Opportunity, 19
- Opposition party candidate Alberto Fernandez looks set to win the presidential election in October, based on Sunday’s surprise primary election result.
- Although Fernandez is viewed as a relatively moderate populist and his economic policy stance has appeared balanced, he is expected to shelve some of the current government’s market-friendly policies.
- Since the result, Fernandez has said he intends to adhere to IMF lending terms. However, we believe that doing so will be challenging, especially given his plans to weaken the currency.
- We estimate that a 50% haircut could eventually be required on tradable debt to make the debt stock sustainable.
- We expect Argentine corporate debt to outperform sovereign debt, although short-term volatility in the corporate bond market will likely continue.
Genuine Scores for the top 3 Emerging Market focused Bond Funds:
- BlueOrchard Microfinance, 100
- DoubleLine Low Duration Bond Fund, 99
- Barings Emerging Markets Debt Short Duration, 95
- Last Sunday’s shocking outcome of the preliminary polls in Argentina sent investors stampeding over the hills.
- These primaries are mandatory for most eligible voters, so they provide a near-zero-error margin, real-time national poll ahead of the real elections.
- Winning 47% of the vote, the challenger Alberto Fernández, thoroughly beat the incumbent, President Mauricio Macri, by 15 percentage points.
- The results were far different from the close race predicted by political pundits, causing equities, bonds and the peso to plunge.
- Now, the populist coalition and its candidate, Mr Fernández, are clear favorites to win the real election in October.
Genuine Scores for the top 3 Emerging Market focused Equity Funds:
- MassMutual Select Equity Opportunities Fund, 85
- MFS Global Growth Fund, 79
- Artisan Developing World Fund, 73
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All the best,
Genuine Impact Team
p.s. all Genuine Scores are accurate as of the 15th of August