Argentina defaulted on its debt for the second time in 12
years after last-ditch negotiations with creditors failed to
secure a deal to save the embattled country's finances.
Latin America's third largest economy could face additional
trouble in the future if creditors force an accelerated time
table for repayment of their bonds.
This news hit the Global X FTSE Argentina 20 ETF (NYSE:
) hard on Thursday, as the fund fell more than 5 percent in early
trading. Trading volume on ARGT also spiked above the 90-day
average as well.
This ETF represents the 20 largest and most liquid companies
that participate directly in the Argentine economy. The
underlying index is market cap weighted to give the largest
companies the biggest pull within the portfolio.
The 3 Biggest ETFs In The World
ARGT has total assets of more than $35 million and charges a
net expense ratio of 0.75 percent. Prior to the rumors of this
credit event, ARGT appeared to be on pace to significantly
outperform a broad-basket of Latin American companies.
Through June 30, ARGT had gained 13.34 percent in 2014. That
performance significantly beats the diversified iShares Latin
America 40 ETF (NYSE:
), which gained just 4.30 percent over the same time period.
Based on this outperformance and significant public exposure
during the World Cup sporting event, ARGT has had net inflows of
over $25 million in 2014. However, that tide may turn with
negative sentiment toward the country's fragile economic
state. Other ETFs that were adversely affected by this news
include the iShares JP Morgan USD Emerging Market Bond ETF (NYSE:
). This dedicated sovereign bond ETF has approximately 2.4
percent of its $5 billion portfolio allocated to Argentina
Emerging market bonds have rebounded significantly from the
volatility they experienced in 2013 and overcame concerns of
geo-political risk in Russia as well. However, this latest credit
event will test the resolve of foreign bond holders moving
Note: Author owns EMB at the time this article was
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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