Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Caveat emptor! Argentine stocks soar as investors shrug off crises

Stock MarketsJun 12, 2020 07:20
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Argentina's stock market logo, in Buenos Aires

By Rodrigo Campos and Karin Strohecker

NEW YORK/LONDON (Reuters) - Argentina's stocks are rocketing, outpacing equity market peers around the world in the second quarter as growing risk appetite has lured investors to the country's listed firms despite biting economic and debt crises.

The S&P Merval stock index (MERV) plunged near 50% from mid January to mid March. But this quarter, price returns in pesos for the 20-stock index have climbed as much as 100%. When translated to U.S. dollars using the official exchange rate, they are now up 64%, the most among the largest stock markets globally.

Investors jumped in even as Argentina's government has scrambled to restructure around $65 billion in foreign debt and forecasts called for the economy, mired in recession since 2018, to contract as much as 10% this year.

"There are periods of time where it gets just so cheap that people come rushing and move it to the opposite side for a while," said Robert Lutts, chief investment officer at Cabot Wealth Management in Salem, Massachusetts.

Lutts recently added to his holdings of Buenos Aires-based e-commerce giant Mercado Libre (O:MELI) but said he would not broaden his exposure to Argentina partly on concerns over financial markets' lack of confidence in the country.

Argentina defaulted for the ninth time in May following turmoil sparked last year by the sharp political decline of President Mauricio Macri, seen as a market reformer.

Yet his successor, moderate Peronist Alberto Fernandez, is now seemingly closing in on a debt restructuring deal with international creditors, a development credited as one reason behind the latest leg of the stocks rally.

(Graphic: Stock price Q2 returns in USD,

Some analysts said tight capital controls have added luster to the rally. Parallel trades of the peso value the currency much more cheaply than the official rate, a gap which has widened sharply this year.

"The record in peso terms is more an effect of the currency's devaluation than anything else," said Gustavo Ber, senior economist at local consultancy Estudio Ber.

"The stock market is not reacting to fundamentals as much as it is to money flows," said Ber, adding it was "mostly hot money" meaning traders ready to cash gains.

The Merval is off 12% since hitting a record high on Monday.

Ber said the global "risk-on" mentality was first seen in the performance of Argentine stocks traded in U.S. exchanges and those speculative bets were later reflected in the local market.

(Graphic: 2020 performance: Argentine ADRs,

The return on Argentina's American Depositary Receipts (ADRs) is 22% for the quarter so far (BKAR), compared to a 16% increase for the U.S. benchmark S&P 500 (SPX).

What makes Argentina exceptional is that all its major stocks are listed in New York as ADRs, offering international investors an easy way to play Argentina.

"That means a lot of stocks remain investable under a sovereign default which would normally put equities off limits," said Dubai-based Hasnain Malik, emerging markets equity strategist at Tellimer.

Some like Mercado Libre (O:MELI) and Globant (K:GLOB) offer investors exposure further afield. They are based in Argentina but generate most revenues internationally.

"While there are still massive uncertainties ahead for the sovereign debt restructuring and the economy, there are unique circumstances for one or two of these ADR listings," Malik said.

Mercado Libre's ADR is up near 50% this year and 75% this quarter alone. The local stock (BA:MELI), up 137% this quarter, is not part of the Merval index.

Argentina exposure has the sixth-largest overweight among active global emerging market funds at +0.66% above benchmark, according to Copley Fund Research. Some 40% of active Global EM funds in a sample of 224 were invested in Argentina and 38% are overweight the country.

Mercado Libre is also a favorite. GQG Partners, Merian Global Investors and Fisher have all opened new positions in that stock this year, said Copley founder Steven Holden.

"Confidence is starting to return with ownership and allocations rising over the last 6 months," said Holden.

(Graphic: Argentine stocks performance,

Caveat emptor! Argentine stocks soar as investors shrug off crises

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email