An exchange-traded fund tracking the Argentine stock market was set to head sharply lower Monday morning after that country’s pro-business president lost a primary election Sunday, an outcome that suggests it will be hard for him to hold on to power after final-round elections in October.
The Global X MSCI Argentina ETF
ARGT, -24.40%
was down more than 22% at the start of trading Monday. The Wall Street Journal reported that President Mauricio Macri received 32% of the vote on Sunday, compared with 47% for his challenger, Alberto Fernandez, a member of the Peronist movement.
Investors had assumed Macri would lose in the primary, said Stuart Culverhouse, head of sovereign and fixed income research, and Hasnain Malik, strategy and head of equity research, at Tellimer. “Markets will react badly when they open,” they said in a research note out Monday.
Although the primary loss was priced in, investors had assumed it would be by a slim margin, the Tellimer analysts said, “which he could make up between now and October, on the basis of a higher turnout in the election itself (the PASO generally has a lower turnout), conversion of undecideds voters and an improving economy. A 15pt gap, however, may be insurmountable.”
Macri was responsible for securing the largest-ever bailout from the International Monetary Fund in 2018. Still, the Argentine peso is among the world’s worst-performing currencies and inflation reached 56% earlier this year.
“In short, it looks like (Macri) has paid the price for the poor state of the economy,” the Tellimer analysts said. “The challenge for Fernandez now will be to convince markets (and the IMF) that if he wins, he will maintain sound policies.”
Source : MTV
