By Dimitra DeFotis
Moody’s Investors Services said the outlook has improved for Argentina’s credit market, though it cautioned investors are still likely to suffer losses on defaulted debt.
Reuters
Argentina’s president-elect Mauricio Macri.
The Global X MSCI Argentina exchange-traded fund (ARGT) is down 0.3% today. State-controlled oil producer YPF (YPF) is down 1.3%. Banks Banco Macro (BMA),BVA Banco Frances (BFR and Grupo Financiero Galicia (GGAL) are all lower, as is internet sales platform MercadoLibre (MELI).
Moody’s changed its outlook to postive from stable on Argentina’s Caa1 issuer rating, and on (P)Caa2 foreign-legislation and restructured local-legislation foreign currency obligations, citing Mauricio Macri’s narrow win over Daniel Scioli, the would-be successor to outgoing Peronist President Cristina Fernandez de Kirchner likely means “a major market-friendly break” from the last 12 years:
“The main driver of the outlook change to positive from stable is Moody’s expectation that Argentina’s policy stance will become more credit positive in the aftermath of Sunday’s elections in which Mauricio Macri was elected Argentina’s president for the 2015-19 term … President-elect Macri will take office on 10 December, becoming only the third non-Peronist President since 1983 …
A prompt resolution of the holdout [bond-investor] saga is a key Macri pledge … and is required for the government to borrow abroad, which it will probably need to do in order to meet upcoming debt service obligations. Official reserves have fallen to below $22 billion, raising uncertainty about the government’s ability to meet 2016 debt service obligations and adding pressure for a swift resolution with holdout creditors.
In addition, we expect the new administration to devote efforts to improving the economic and institutional environment over the coming months, through a series of reforms aimed at tackling persistently high levels of inflation and lack of data accountability. At around 25%, Argentina’s inflation rate is one of the highest in the region and among sovereigns rated by Moody’s.”
That said, Moody’s affirmed ratings on defaulted bonds, writing:
“The (P)Caa2 rating on the foreign legislation and restructured local legislation foreign currency obligations reflects the likelihood of higher losses to investors from the continuing default of bonds caught in he ongoing legal proceedings in US courts, thereby differentiating this portion of Argentina’s debt from the rest.”
See our posts “In Argentina Election Euphoria, YPF Oil Stocks Tumble” “Soros Bets On Argentina Latin America Hotels” and “MercadoLibre Installment Plan: Shopping Growth In Brazil, Alibaba Lurking?”
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