Country ETF: Is Argentina Headed For Trouble? (YPF, ARGT, BMA, RBS, EEM, VWO)
Jonathan Yates: A Royal Bank of Scotland (NYSE:RBS) report is warning investors of troubles ahead in Argentina, as the exchanged-traded fund (ETF) for the country (NYSEARCA:ARGT) and major stocks such as YPF SA (NYSE:YPF) and Banco Marco SA (NYSE:BMA) are all near full-year lows.
RBS analyst Siobhan Morden is warning clients to dump Argentine securities.
As reported in an article in the Financial Times by Jonathan Wheatley, “The Argentine model appears to be heading for trouble,” Ms. Morden contends that, “The problem is that Argentina has been running at above-trend growth for many years and is clearly overheating.”
The government of Argentina claims inflation is less than 10%. Analysts put it at around 25%. Either rate is unsustainable.
As evidence that the government of President Cristina Fernandez is on the wrong course, Morden points to the financial sector with troublesome interest rates, falling bank deposits and foreign exchange reserves. These problems were pointed out previously in an article, “Argentine attempt to restrict foreign exchange may be costly,” on www.emergingmoney.com.
Over the course of 2011, the cost of credit default swaps for Argentina more than doubled. Year to date, the share price of Banco Marco SA (NYSE:BMA) has fallen almost 60%. The exchange-traded fund (NYSEARCA:ARGT) is down almost 30% since launching. Even regional oil heavyweight YPF SA is off over 23% for 2011.
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