With the market awash in quantitative easing hope turned
ebullience, it is not surprising that the performances of some
less-than-popular international ETFs are going unnoticed. Such is
life for the Global X FTSE Argentina 20 ETF (NYSE:
), the lone ETF tracking the controversial frontier market.
Unknown to many investors is the fact that the Global X FTSE
Argentina 20 ETF is up four percent in the past month. More
impressive is the fact that ARGT has jumped 5.4 percent in the past
five trading days and is trading above $9 for the first time since
Part of the impetus behind ARGT's bullishness this week may come
as a surprise to some investors. That reason being political unrest
in what is now South America's
third-largest economy behind Brazil and
Argentines are not happy with President Cristina Fernandez and
her way of doing business. The Fernandez Administration drew heavy
scrutiny earlier this year for Argentina's nationalization of
energy firm YPF S.A. (NYSE:
), a move that caused yields on
Argentine bonds and the credit default swaps
insuring those bonds
to blow out.
Thursday night, thousands of Argentines took the streets of
Buenos Aires, the nation's capital, in what the
Associated Press called the largest protests yet
against the Fernandez government. Fernandez has seen her popularity
erode amid corruption scandals, violent crime and her heavy-handed
approach to economic affairs, the AP reported. It is not impossible
for country-specific ETFs, even those tracking higher risk frontier
markets, to rally amid political volatility. The performance of the
Market Vectors Egypt ETF (NYSE:
earlier this week proves as much
However, the comparison of ARGT and EGPT is of the
apples-to-oranges variety. EGPT is one of the best-performing
country-specific ETFs year-to-date. ARGT is one of the worst.
Egypt's recent political volatility turned violent and is aimed at
the West. Argentine protesters are not decrying Western policies,
but rather the policies set forth by their own government.
The Fernandez Administration is a major reason why foreign
investors have remained apprehensive about Argentina despite the
country's oil and natural gas reserves. ARGT has been adversely
impacted by this scenario. The ETF debuted in March 2011 and has
never really flourished in terms of gathering assets. Right before
the YPF nationalization, the ETF had about $3.5 million in assets
under management. At the close of U.S. markets on September 13,
On the other hand, there is at least one sign traders are
encouraged by the fact Argentines are now standing up to Fernandez.
ARGT is up 4.4 percent today on volume that is more than double the
Still, there are risks. Argentina's rate of inflation is
soaring, punishing the country's peso in the process. The weak peso
has chased Argentines into U.S. dollars, but the country has now
made such transactions illegal, the AP reported. Additionally,
Fernandez will not be up for reelection until 2015 and there is a
chance she could act to dismiss term limit laws to stay in power
That could mean if Argentines truly want political change, it
could take an old school Latin American coup to make that change a
Obviously, there are risks with ARGT and the broader Argentine
economy. However, traders that are willing to treat ARGT as a
trade, not an investment, could find that bad news for Fernandez is
good news for them.
For more on ETFs with significant political risk, click
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