Argentina ETF Assets Triple as Traders Look Past Default

Aug. 7 (Bloomberg) -- Weeks after the Argentine team was shut out in the World Cup final, talks in Manhattan broke down between Argentina and some of its creditors, the most important a group of hedge funds led by billionaire Paul Singer. Katia Porzecanski has more on Singer's brawl with Argentina. (Source: Bloomberg)

Investors added $24.6 million to the only Argentina-focused exchange-traded fund in the last three weeks, tripling its size amid speculation the country will weather the fallout from its second default in 13 years.

Inflows into the Global X FTSE Argentina 20 ETF (ARGT) have pushed total assets to about $36 million, according to data compiled by Bloomberg. The fund, which invests in American depositary receipts of Argentine companies, has jumped 9.3 percent this year, even after the benchmark Merval stock index tumbled last week as the government missed a deadline to pay $539 million in interest on its overseas bonds.

Investors are looking past the short-term pain of the default to bet a resolution in the nation’s battle with holdout creditors and a new government next year will help boost corporate earnings growth, according to Christian Reos, head of research at Buenos Aires brokerage Allaria Ledesma & Cia. President Cristina Fernandez de Kirchner, who has failed to curb inflation and prevent an economic slowdown, is unable to run for a third term next year.

“People aren’t investing in Argentina because of what’s happening right now, they’re investing because of what’s coming up in the next two years,” Reos said in an Aug. 5 telephone interview from Buenos Aires. “They’re betting on the next presidential elections and more market-friendly economic policies.”

About 60,000 shares, or $1.3 million, of the ETF changed hands daily over the last 30 days, Bloomberg data show. Shares of Tenaris SA, YPF SA and MercadoLibre Inc. make up about 40 percent of the fund’s holdings.

To contact the reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net; Jenna M. Dagenhart in New York at jdagenhart@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Marie-France Han

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