• "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"

Argentina Default Fear Looms as Traders Dump Assets

Goldhedge

Moderator
Site Mgr
Sr Site Supporter
Joined
Mar 28, 2010
Messages
41,777
Likes
65,929
Location
Rocky Mountains
#1
Argentina Default Fear Looms as Traders Dump Assets

Sydney Maki and Aline Oyamada
Bloomberg
August 12, 2019


(Bloomberg) -- Suddenly, fears of a full-blown financial crisis in Argentina have once again come rushing to the fore.

In the wake of President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse in a selloff that left much of Wall Street wondering whether the crisis-prone country was headed for yet another default.

The upset, widely seen as a preview of October’s presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the international markets. It deepened worries his populist opponent, Alberto Fernandez, and running mate, former president Cristina Fernandez de Kirchner, will try to renegotiate its debts as well as its agreements with the International Monetary Fund. The country has billions in foreign-currency debt due over the coming year.

“The market is starting to price in default,” said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Asset Management. “The market is unwilling to give Fernandez the benefit of the doubt.”

Credit-default swaps now show that traders are pricing in a 75% chance that Argentina will suspend debt payments in the next five years. On Friday, the likelihood was just 49%. Its dollar-denominated government bonds lost roughly 25% on average, pushing down prices to as low as 55 cents on the dollar. Yields on shorter-maturity notes soared past 35%.

The peso tumbled as much as 25% to a record-low 60 per dollar Monday and the Merval stock index lost the most ever in intraday trading.

Expected to trail his opponent by just a few points, Macri was instead pummeled at the polls Sunday, with voters giving Fernandez a 15-point lead. The sudden shift in voter sentiment shocked foreign investors and Argentines alike, who have suffered through years of high inflation, economic malaise and political division.

Argentina has a long history of fiscal crises and it was only in 2016, under Macri, that the country put its most recent sovereign default behind it. Argentines still remember the 15-year default saga and deep recessions following a record default in 2001.

The government and its subsidiaries currently have $15.9 billion in debt payments denominated in dollars and euros due in 2019, according to data compiled by Bloomberg. There are another $18.6 billion in bond principal, loans and interest payments issued in pesos.

Investors are fearing the worst. Fernandez was cabinet chief under former President Nestor Kirchner, while his vice presidential pick, Cristina Kirchner, led the republic for eight years before Macri came to power. During her time in office, Argentina was marked by currency controls, data manipulation and protectionist policies on trade to protect national industry. And, of course, it was also punctuated by another default that made the country an international pariah for years.

QuickTake: Why Kirchner’s Comeback Goes Through Argentine Court

“It is going to be an extremely tough period for Argentinian assets,” said Marcin Lipka, a senior analyst at brokerage Cinkciarz.pl in Zielona Gora, Poland. “Without moderation of the Fernandez duo and regarding increasing expectations of another fight with the IMF, I would not exclude that peso could hit 100 level to the dollar in the next 12-month period.”

Lipka, whose outlook on Latin America currencies has been among the most accurate since the second quarter of 2018, said a rate of 100 pesos per dollar wasn’t his base case, but that he does expect extreme volatility in the coming weeks. There’s a risk the currency will be doubly hit amid liquidity issues, capital outflows and string inflation pressure.

Luiz Ribeiro, the lead money manager for Latin American equities at DWS Group in Sao Paulo, said he will probably cut his exposure to Argentina in half. His Latin American equity fund outperformed 92% of rivals in the past year after building up holdings in Argentina amid expectations of political continuity.

“What we are pricing right now is radical change in economic policies,” he said in an interview. Still he’s staying overweight relative to the benchmark as “Alberto Fernandez could come up with more moderate speech, which I think is possible given the kind of turmoil we see in the market right now.”
 
Last edited:

Goldhedge

Moderator
Site Mgr
Sr Site Supporter
Joined
Mar 28, 2010
Messages
41,777
Likes
65,929
Location
Rocky Mountains
#2
August 31, 2018

Not a Bad Time to 'Get More Involved' in Argentina, Humes Says

 

GOLDBRIX

God,Donald Trump,most in GIM2 I Trust. OTHERS-meh
Sr Site Supporter
Platinum Bling
Joined
Apr 4, 2010
Messages
10,519
Likes
12,505
#5
WOW!!! Back in the 70s Argentina was considered the Southern Version of US Agriculture. They completed in wheat, soy bean, corn, and definitely cattle. I recall my grandfather buying frozen bull meat from Argentina because of the beef cattle shortage in the U.S. at the time. High American Beef prices (at the time) and USDA CHOICE and PRIME beef produce a lot of extra fat that needs to be trimmed off becomes waste. And most meat trimmings off Choice and Prime can not use up all that fat in ground products.
Instead take lean bull meat grind in 10-20 percent trimmed fat and you got a great Hamburger, Ground Beef, or Ground Chuck product to sell and ZERO waste, and no taste difference since "Fat is where the Flavor is".

Argentina must have bought into the Global Warming/Cooling, Climate Change UN agenda and ruined their economy over it.
 

Aurumag

Ag mirror of truth Aurum purity of mind
Midas Member
Site Supporter
Joined
Mar 31, 2010
Messages
9,411
Likes
11,477
Location
State of Jefferson
#6
argentina has a long history of being a socialist pos,

wouldn't go there, nor invest 2 bits there

typical south amerikan rubbish
But the IMF, masters of cheap asset acquisition at gun-point, will be there, so you can rest assured that everything is under control.
 

oldgaranddad

Gold Member
Gold Chaser
Midas Supporter
Joined
Feb 21, 2012
Messages
4,792
Likes
8,223
Location
On the top shelf.
#7
Anyone who was dumb enough not to practice "cash and carry" with Argentina deserves what they get. Nothing! You get nothing, You lose! Good day sir!

What gets me is all Argentina needs to do is look over the mountains at Chile to see what they need to do correctly.
 

dacrunch

Platinum Bling
Platinum Bling
Joined
Apr 9, 2010
Messages
4,173
Likes
2,912
#8
string inflation pressure
Off topic, but...
- sounds like the Kardashians...
 

GOLDBRIX

God,Donald Trump,most in GIM2 I Trust. OTHERS-meh
Sr Site Supporter
Platinum Bling
Joined
Apr 4, 2010
Messages
10,519
Likes
12,505
#10
If JPM Chase can write off all of Canadas CC debt. Then all of this is a scam.
And JPM Chase will more than likely be able to use that write-off against US Profits for Tax purposes. JMO
 

the_shootist

Midas Member
Midas Member
Midas Supporter
Joined
May 31, 2015
Messages
33,436
Likes
44,292
#11
Maybe I'll buy a banana plantation down there. Do they have banana plantations in Argentina?
 

Fatrat

Silver Member
Silver Miner
Site Supporter
Joined
Apr 15, 2018
Messages
2,898
Likes
2,357
#12
And yet, someone keeps lending them money....