Steer clear of Argentina

Problems are piling up for Argentina. Investors should give the country a wide berth.

"It is a sad story," says Jorge Mariscal of UBS Wealth Management. "Argentina has all the ingredients to be great, but the political make up has been a disaster." The economy is "a mess", says Dimitra DeFotis in Barron's, and it looks unlikely to turn the corner anytime soon.

Argentina is in default on a chunk of its sovereign debt, which will make it far harder to raise money in international markets.

The currency has tanked as confidence in the country has fallen, in turn fuelling inflation, which has reached around 40% although the official figure is 30%. Falling prices for agricultural commodities, which make up over a third of exports, aren't helping.

Growth is around zero, and sentiment took another knock last month when the central-bank governor resigned after a dispute with the Argentinian president. He had tried to temper inflation, staunch capital flight and head off a currency crisis by raising interest rates.

The episode was seen as an attack on the central bank's independence by the leftist, populist government.

Meanwhile, the equity market has become smaller and riskier. It has been relegated to frontier' status by index compilers MSCI as firms have been nationalised or gone private. Investors should steer clear.

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
The rising dollar is proving bad news for most other assets – will it last?
Investment strategy

The rising dollar is proving bad news for most other assets – will it last?

Precious metals, stocks and pretty much every other asset has taken a tumble as the US dollar strengthens. Dominic Frisby looks at how long this trend…
23 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020