When it comes to single-country, large-cap focused
offering exposure to Latin American nations, there are six somewhat
The iShares MSCI Brazil Capped ETF (NYSE:
)iShares MSCI Chile Capped ETF (NYSE:
) iShares MSCI All Peru Capped ETF (NYSE:
)iShares MSCI Mexico Capped ETF (NYSE:
)Global X FTSE Colombia 20 ETF (NYSE:
)Global X FTSE Argentina 20 ETF (NYSE:
Chances are most investors would not be able to guess which one
of those ETFs has been the best performer this year. Hint: It is
the only one of the group that is up year-to-date. Hint: It is the
one that many investors would least expect.
long list of woes
ensure EWZ is not the answer. Falling industrial and precious
metals prices do the same for ECH and EPU. Long story short, the
Global X FTSE Argentina ETF is the best performing single-country
Latin America ETF this year.
In the past month alone, ARGT has surged 14.4 percent and that
run comes after the ETF was
reverse split 1-for-3 in May
ARGT's new found upside represents a stunning reversal of
fortune from 2012 when the ETF was hammered on fears the South
American nation was flirting with its second sovereign debt default
this century. Argentina's anti-free market government and the
possibility of a second sovereign default are among the reasons
index providers MSCI (NYSE:
) and FTSE have previously warned the country could lose its
frontier market status and be relegated to "stand alone."
Argentina's Rally May be Short-Lived
Although ARGT has jumped 6.5 percent this year as the
aforementioned LatAm ETFs have all traded lower, the overhang of a
bond default is not gone. The country is viewed as the least
creditworthy borrower in the developing world and has the highest
probability of default among emerging nations.
Last year, a U.S. appeals court ruled Argentina cannot make
payments on its overseas debt until it pays holdout investors from
its previous default. Those investors include U.S. hedge fund
Elliott Management. Last month, amid opposition from the U.S., the
International Monetary Fund scrapped a proposal to support
Argentina in the bond fight.
Citigroup estimates by the end of 2015, the central bank's net
reserves, which exclude dollar deposits, could fall to $12.5
billion and cover just two months of import demand and Citi says
the likelihood Argentina will restructure the 2015 bonds is now
according to Bloomberg
Still, there is hope for regime change in Argentina, a catalyst
that could buoy ARGT's fortunes going forward. Yields on the
country's 15-year sovereign bonds were spotted around 9.45 percent
earlier this week (those yields had previously flirted with 12
percent in the past year) following local elections.
Those elections showed voters' patience with President Cristina
ruling party have worn thin
. That party's candidates drew barely more than 26 percent of the
vote, but voters have to wait another two years before getting a
chance to oust Kirchner.
Aside from the bond flap and local politics, investors need to
keep an eye on oil services firm Tenaris (NYSE:
), e-commerce firm Mercadolibre (NASDAQ:
) and McDonald's franchisor Arcos Dorados (NYSE:
) as those stocks combine for 48.4 percent of ARGT's weight.
For more on ETFs, click
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