Election Confidence Gives Argentina’s ETF A Boost

By James Eugene

Argentina’s largest exchange traded fund, the Global X MSCI Argentina ETF (ARGT), recorded its largest inflow of money on Wednesday 5th November after investors gained confidence that the conservative candidate could be victorious in the country’s upcoming election.

According to Bloomberg, the ARGT, which tracks the MSCI All Argentina 25/50 Index, “recorded inflows of $970,000 on Wednesday, the first for the fund since April”. As a result, the ETF has continued to enjoy an increase in its value, boasting a 22% increase in the last month alone and further contributing to its 4% growth since the start of the year. However, it should also be noted that that the ETF is down by 13% since the start of May, a time when it was enjoying large inflows and investor confidence.

Global X MSCI Argentina ETF

Opposition candidate Mauricio Macri has injected confidence into investors, with the market clearly favouring the conservative candidate over the the Cristina Fernandez de Kirchner backed candidate Daniel Scioli as both candidate prepare to face off against each other on November 22nd. The first round of the election was close as Scioli came up on top of Macri with 36.86% and 34.33% of the votes respectively.

According to Benzinga, since the results of the first election were released not only did Moody’s upgrade Argentina’s debt rating from negative to stable, but also a handful of US-listed Argentine stocks have enjoyed large increases in their share prices:

1. Banco Macro – 30%
2. YPF – 20%
3. Telecom Argentina – 20%
4. BBVA Banco Frances – 19%

Macri is a proponent of removing capital controls in the market and also negotiating with creditors in order to improve Argentina’s credibility in the international bond markets. He also vows to boost investment, tackle rising inflation and maintain social programs (including fighting poverty and improving access to education and healthcare).

Will the ETF Continue to Rally?

Possibly. A Macri victory will probably cause the ARGT to jump up further due to his more “market friendly” approach compared to Scioli. However, that doesn’t mean that the market will react negatively if Scioli emerges as victorious, as he is also views to be more tolerant and less interventionist with the markets compared to his predecessor Fernandez, who frequently called for government intervention. In fact, hedge fund manager Dan Leob has recently stated that “he’s confident in [Argentina’s] debt prospects no matter who wins the nation’s runoff elections”.

Either way, any of the two front-runners winning will boost the ETF, but Macri will almost always be viewed as the favourite for the free market sympathizers.