Foreign investors return to the region but avoid Argentina

The percentage of foreign investors positioned in Argentine assets (bonds or stocks) over GDP is below 15% and is the lowest in the region. This is revealed by a recent report prepared by analysts at the International Institute of Finance (IIF).

The metric contrasts with the almost 30% that was evidenced in 2018, at which time financial assets were in a totally opposite process, with a strongly bull market in bonds and stocks.

What the ratio in question shows is not only the percentage of investors who have Argentine assets but also their valuation. This implies that for the same holding but at a lower price, the ratio ends up falling.

Therefore, Due to asset price issues, as well as foreign investors’ holdings, the ratio has plummeted by nearly 50% from 2018 to date.

Juan Manuel Franco, an economist at Grupo SBS, recalls that investors have been leaving Argentine assets since the balance of payments crisis in Argentina broke out in the second quarter of 2018.

As highlighted, this process was later accentuated in the presidential STEP of August 2019 and after the start of the Covid crisis in March 2020.

Currently, the Grupo SBS economist believes that “By now, most investors who would like to clear their position of Argentine assets have already done so. largely after almost 3 years. “

The bad performance of assets and the lack of attractiveness in investing in local bonds and stocks prevented it from rebounding to that ratio of exposure of foreign investors in Argentine assets over GDP. This dynamic is in contrast to the improvement seen in the rest of the countries of the region.

There has been a strong rise in the ratio of countries such as Brazil and Chile fundamentally, and to a lesser extent Colombia and Mexico.

However, they all show more important rebounds than the meager advance seen in Argentine assets, which occupy the last place in their recovery.

Positive news such as the debt swap, which allowed the Government to improve its debt profile on the margin, did not bring with it a substantial improvement either in assets or in the positioning of investors’ portfolios in local assets.

In fact, today the bonds are located about 32% on average below the values ​​compared to where they began to operate once the debt swap took place, in September 2020.

Pedro Siaba Serrate, strategist at Portfolio Personal Inversiones, explained that after the debt restructuring, Argentine bonds failed to recover despite having improved their technical position.

“When new instruments go public, they tend to show weakness before the departure of investors who waited for that moment to reduce their position. Unlike what happened in Ukraine (2015), Jamaica (2013), Greece (2012), and even in In Uruguay (2003), Argentine bonds fell after the announcement, but have not yet recovered ground. The Argentine Globals closed 2021 with drops of between -3% and up to -14% and show declines of up to 32% since they went public“he commented.


The technical position of an asset usually shows the excess or shortage of holding that an investor has on that instrument based on their expectations about it.

When many investors generally have a higher percentage of that asset in their portfolios than they would like to have in their portfolios, it is often said that the technical position of the asset is high..

However, When the technical position is low, it implies that there are few market participants with a holding greater than they would be willing to have., or, that they have a surplus of assets above their acceptable limit.

Therefore, a high technical position implies that there is some degree of bullish saturation in the asset, which shows that the market bought excessively that instrument (or kind of instrument). Therefore, the risks of an adjustment in its price tend to rise.

The market punishes consensuses permanently and if there are many bought (high technical position), it is expected that at some point they will end up suffering.

The same, but on the contrary, it could be thought that a low technical position implies that few investors are positioned in these assets and that, therefore, there is very little interest in it.

Therefore, If there are few participants willing to have such an asset in their portfolios, it implies that the technical position is clean and it is more feasible (or more likely) to see some bounce in such instruments.

The same is what happens to Argentine bonds, which show a fairly low (or clean) technical position.

However, despite this metric, analysts believe that it is insufficient for us to see a rebound in the market and that it will come from signals that the Government can give regarding the future economic dynamics of the country.

Juan Anciaume, head of sales & trading and partner de Criteria, considers that the technical position in Argentine assets looks favorable from a historical point of view, although it warns that it looks insufficient to see a sustained recovery.

“Foreigners have been divesting peso-denominated bonds for some years now and their holdings are relatively low. Something similar could be happening with their holdings of equity assets. All of this is a necessary but not sufficient condition for a rally of Argentine assets“, estim.

In addition, Anciaume estimated that, going forward, “when the perception of investors about the economic direction improves again, we could experience new investment flows towards local assets, which will increase their valuations.”

Attentive to the IMF

The market closely follows the advances and setbacks in the negotiations between the Government and the IMF in order to be able to generate positive expectations towards a normalization course of macroeconomic variables.

But the absence of this agreement generates a lack of optimism in the market, which ends up leaving the technical position of investors unchanged, as well as a lack of progress in stock and bond prices.

For this reason, the ratio of the percentage of foreign investors in local assets to GDP remains almost unchanged from 2020 to date.

Argentine bonds have lost more than 60% of their value in the last three years (including the write-off in debt restructuring), while shares today are worth 22% on average of what they were worth in 2018, when the S&P Merval in dollars came to operate at 1800 points.

The vast majority of Argentine stocks on Wall Street have lost between 80% and 40% of their value in the last three years.

Therefore, Bonds and stocks start the year with very low prices relative to its values ​​of three years ago as well as a historical metric.

Martin Polo, Cohen’s chief strategist, believes that the dynamics of local assets do not depend so much on their technical position.

More than the technical position, what will define the future of local assets is the history that the Government can put together in terms of the prospects for the country. If Argentina does not achieve a sustainable agreement with the IMF that aims to reduce macroeconomic imbalances, the market will avoid Argentina. If instead, that agreement is achieved, we see that many assets are very cheap and can generate that expectation of improvement “, he commented.

Juan Manuel Franco considers that the improvement in the technical position is positive for local assets, although he emphasizes that it is key to see macroeconomic signs to underpin an eventual advance in bonds and domestic stocks.

“Going forward, this could be good news since before some indication of a change in macro policies that points to the stability of the main economic variables, investors who today do not have Argentine assets could begin to demand them, motivating price increases. For both sovereign dollar bonds and stocks, current valuations could give good returns, albeit with volatility and for profiles with high tolerance for risk.“said the economist at Grupo SBS.

Finally, Pedro Siaba Serrate, from PPI, highlighted that the improvement in the technical position of local assets it is not enough to see a better performance in the bonds.

“Having improved the technical position is not enough per se to improve the outlook for Argentine assets. Beyond the attractiveness that entering instruments at these prices generates in some players, the flows of real money‘They will come before a resounding change of course of expectations and that seems very difficult for it to happen during the current administration“, estim.

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Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Phone : +1 281-333-2229

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