Graph: Can Argentina’s stock market regain some ground?

30th July 2020

By The Essential Staff

Graph: Can Argentina’s stock market regain some ground?

Since Mauricio Macri’s economic plans quietly began to unravel in January 2018, as his government struggled to re-finance its debts and ended taking the biggest bailout in IMF history by mid-year, the country’s benchmark Merval stock market index has taken one of the biggest dives in history.

</p> <img class="wp-image-10556 aligncenter" src="" alt="Argentina's Merval stock market index in US dollars" width="774" height="538" srcset=" 2500w, 300w, 1024w, 768w, 1536w, 2048w, 600w" sizes="(max-width: 774px) 100vw, 774px" /> <p>Between early 2018 and the first rumors of an extension of the IMF loan in August, stocks skydived by two thirds of their value, and dumped even further after Fernández&#8217;s shock landslide primary win a year later, as well as with the COVID-19 pandemic in March 2020, which took the Merval to a low of 235, not seen since the 2008 financial crisis.</p> <p>In the two and a half years since the start of the plunge, Argentina&#8217;s financial assets have attempted a recovery a few times, but so far none of the moves proved sustained. The first bounce of the Fernández era came shortly after his win, when he tried to respond to the market&#8217;s initial panic by reassuring investors he would not be their enemy and naming Martín Guzmán, an heterodox economist who still argued about the importance of fiscal prudence, in December. That recovery, which took the Merval to 600 points, faded in January and was a thing of the distant past by the time the pandemic swept with global markets in March.</p> <p>The progress seen in the last few months of <a href="">debt re-negotiations</a>, coupled with global weakness in the value of the US dollar that has <a href="">helped emerging markets</a> across the globe over the same period, have created the second bounce of the Fernández era, from 235 USD in March to a max of 438 last week, although struggling to progress past the lows of 2019. Investors are hoping that a deal with reticent bondholders could help assets break past that barrier and move back higher. But others fear that the likelihood of an agreement is largely &#8220;priced in&#8221; already, and even an agreement could trigger a &#8220;sell the news&#8221; event.</p> <p>A deal with foreign creditors, followed by progress in negotiations with the IMF and other debt holders, as well as progress with a new economic plan, could trigger further recovery. But the finances of <a href="">Argentina</a> and the globe are particularly fragile at present. A recovery of the US dollar compared to other world currencies (which could also face downward pressure as every central bank has been forced to ease monetary policy due to the crisis), a new global <a href="">run to safety</a>, or further problems in Argentina&#8217;s debt-laden Treasury and Central Bank, could easily destabilize the situation yet again.</p> <p>

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The Essential Staff

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