Argentine Assets: Shiny on the Outside
Spread compression and an acquisition boom would suggest Argentina is emerging from a decade-long slump. Markets may be poised to correct since little has changed.
If trading charts and FDI
data are anything to go by, last year was
Argentina’s annus mirabilis. By February
25, Argentina’s five-year CDS was at 662 basis
points from 4,669 basis points in March 2009.
The dollar volume of M&A deals involving foreign acquirers
of Argentine assets skyrocketed to $7.97 billion from just
$2.00 billion the year before. Structured finance transactions
reached close to 17.7 billion pesos in 2010, an 83%
increase over 2009, according to Fitch.
And secondary debt
trading volume hit $102.6 billion in the third quarter of 2010,
according to EMTA. This was the highest level since 2007,
making Argentina the sixth most actively traded EM market,
behind Brazil, South Africa, Hong Kong, Turkey and Poland.
But rightly or wrongly, Argentina carries a significant risk
premium compared to neighboring economies, though it has
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