Milleiho's Maiden Voyage to Argentina, Stock and Bond Markets' 'Best Year Ever'

Representative Index S&P Merval
Soars 179% This Year

Yonhap News

Argentina, which had been struggling with the risk of default, has had its best year in the stock and bond markets this year. This is the result of investors betting that President Javier Milei's "chainsaw reform," inaugurated in December last year, could bring economic stability.

The S&P Merval Index, Argentina's representative stock index, rose 179.37% through the close of trading on the 26th (local time) this year. This is a rate of increase that no advanced or emerging market stock index can match. It far surpasses the 27.30% increase of the U.S. S&P 500, which broke its record high more than 50 times this year alone.

During the same period, the MSCI Argentina ETF (ARGT), a dollar-denominated exchange-traded fund, also showed a high increase of 69.45%.

Argentine government bonds also continued their strong performance throughout the year. The ICE Bank of America (BoA) U.S. Dollar Argentina Government Bond Index, which tracks the performance of Argentine sovereign bonds, recorded a return of about 90% this year.

The Wall Street Journal (WSJ) reported that the hedge fund industry is positively evaluating President Milei's sweeping deregulation and bold government spending cuts, known as the chainsaw reform, which was introduced at the end of last year.

Argentina's gross domestic product (GDP) in the third quarter (July to September) increased by 3.9% compared to the previous quarter, showing signs of economic recovery. The consumer price index rose by 2.4% in November, marking the lowest increase in four years. This contrasts sharply with the situation of having experienced nine defaults in total until 2020.

The hedge fund industry views Argentina's economic growth next year positively and plans to continue investing. Xavier Hovas, head of emerging equities at Carmignac, said, "(Milei) knows exactly what he wants to do, and his direction is very clear."

However, a major variable in the economic reform is how much new borrowing Argentina can secure while negotiating with the International Monetary Fund (IMF). Some speculate that President Milei, the friendly U.S. President-elect Donald Trump, and Tesla CEO Elon Musk could provide significant help in the negotiations between Argentina and the IMF.