Merval joins wider Argentine sell-off, drops 5.5%
Argentine stocks opened with a thud on Wednesday.
The country’s benchmark Merval stock index sank 5.5 per cent at the start of trading on Wednesday – tracking the declines seen earlier this morning in US-listed Argentine companies and the peso.
All 27 stocks on the index were in the red, losses ranging from 1.6 per cent (for lender Banco Macro) to 8.6 per cent (for electricity group Pampa Energia).
The sell-off in Argentine assets comes after MSCI decided – in a surprise move – not to upgrade the country to emerging market status, wrong footing investors who have been aggressively bidding up the Merval on expectations that the country would be able to shed its frontier market status.
Prior to today, the Merval has been up 28 per cent since the start of the year and has advanced more than 74 per cent since Mauricio Macri became president over 18 months ago.
Enthusiasm for Argentine stocks has been boosted by a host of market-friendly policies that Mr Macri has implemented to open up the economy. Agreements made with holdout bondholders from its 2001 default have also helped pave the way for the country’s return to the global capital debt market last year following a 15-year lock out. This week, the country issued a landmark $2.75bn century bond, a spectacular feat given that the country has defaulted eight times on its debt since independence in 1816.
Analysts said while a sell-off was expected, they do not expect it to last. Instead, some see it as an opportunity to buy given that the MSCI decision would not alter Mr Macri’s reform agenda or the country’s improving fundamentals.
“We think the long-term picture in the country still looks good and we would look to buy any decent-sized dip in the market over the next few weeks,” said Geoff Dennis, emerging markets strategist at UBS.