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A breather: Argentine markets recover after a disastrous week

Ignacio Teson•Friday, February 9, 2024•2 min read

A breather: Argentine markets recover after a disastrous week.

After accumulating an 11% decline until Thursday, Argentina rises by 4% today, closing the week with a decrease of approximately 7%.

After a bloody week where Argentina’s main index, the MERVAL, lost 11% of its value in dollars, it rebounds by about 4% today. The week ends with some Latin American countries showing positive returns, buoyed by the Chinese markets. However, in Argentina, the rejection of a key law proposed by President Javier Milei ended up impacting asset prices.

The declines were led by the banking sector, with Banco Supervielle and Banco Galicia at the forefront, experiencing drops of approximately 15% to 20% between Monday and Friday.

On Tuesday night, the Argentine Congress rejected the most significant bill presented so far by Javier Milei, the country’s president. The objective of the bill was to overhaul the country’s legal foundations.

It contained over 600 articles, of which 400 were subsequently eliminated after several negotiations. 200 remained, but the lower chamber decided to discard them altogether. To be precise, in order to avoid total defeat, La Libertad Avanza, the president’s party, decided to withdraw the bill while it was still under discussion.

The lack of political support became evident quickly. La Libertad Avanza only has 37 deputies out of 256 in the lower chamber, and 7 senators out of 72. Despite the president’s allies having gathered a majority to discuss the reform, the reality is that many of them were unsatisfied with the final wording.

“From minute zero, the ruling party behaved as if it had a broad majority in both chambers. This was compounded by a level of parliamentary inexperience that no one with gray hair in Congress remembers,” said one of the Legislators.

However, it’s important to note that until January, the Argentine market thrived as one of the best-performing in recent months.

Stocks and bond prices had incredible performances from November to January under President Milei’s promised reforms, driven by anticipated sweeping changes and apparent popular backing. ETFs like Global X MSCI Argentina (ARGT) increased by 40%, while individual stocks like YPF, GGAL, and CEPU surged by 90%, 110%, and 77% respectively, among others.

 

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ABOUT THE AUTHOR See More
Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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