No one could have missed the news over the last couple of months of the emerging markets collapse. With US starting to commence its monetary tightening policy, emerging markets (EEM US) have been markets that have been taking the majority of the hit.
Two countries in particular have taken big hits. That is Turkey and Argentina. Turkey has been hit due to the political climate and general uncertainty around the economy. Whilst Argentina has been hit with drought which substantially hit Soy production which is Argentina’s main export which cascaded hitting rest of the economy.
Both Turkey and Argentina have a lot of debt denominated in $ dollars. For Turkey most of the debt is held by private companies, whilst in Argentina’s case the debt is held by the government.
In Argentina, the central bank raised interest rates to 45% this month as inflation hit 31%. In addition, several of Argentina’s major companies are involved in a corruption scandal in which they are accused of paying bribes to former President Cristina Kirchner.
The Argentine Peso have been totally decimated over the last year.
Understandably Argentinean stocks have taken a severe beating. The two main Argentinian ETFS, ARGT an AGT are down ytd more than 22% each.
Today according to Bloomberg Argentina asked IMF to speed up the disbursement of $50bn credit line granted to the country to ease the financial crises. This is mainly to reassure the market as the country.
With all this said, the old Baron Rothschild saying “When there is blood on the street buy”, might come in handy here with Argentina. Things continuing the get worse, and the country might not get out the recession over the 1-2years. But, as things become clearer and the economic reform the Macri government is doing, while the opposition is in disarray with the Kirchner corruption scandal, stability might not be too far away.
Hence, it might be time to put various Argentinean stocks on your radar for when the barrage of bad economic and political stops. Good thing with Argentinean stocks is that there are a fair amount of listed ADRs in the US. That makes the investing/trading in the easier, in addition, removing the FX transaction exposure. Below is a list of various company ADRs that are good to put on the radar for things change.
Source: Seeking Alpha
As can be noted, main industries are Banks, Oil&Gas, and Telecommunication. The Banks that have been taking the biggest hit with this financial crises, and could probably be the ones rallying the most when things stabilize and eventually turn.