LIVE MARKETS-IMF deal could make Argentina great again, says Ashmore

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IMF DEAL COULD MAKE ARGENTINA GREAT AGAIN, SAYS ASHMORE

Ashmore expects a flood of foreign investment into Argentina after it clinched a landmark $20 billion deal with the International Monetary Fund on April 11, that could make the South American country a more attractive market, it said in a note dated May 15.

President Javier Milei's commitment to fiscal discipline and success in his attempt to turn around the Argentine economy has been indicated by ongoing government surplus targets, which will likely continue to keep import demand contained and limit any deficits in external accounts, said the asset manager.

Another Milei term could introduce more structural reforms, and FDI could broaden from the energy and agriculture sectors to others, Ashmore says. Construction and manufacturing heavy sectors could benefit from stable macroeconomic indicators, lower rates and higher growth.

"The key thing to watch is Milei's popularity levels now. If he can consolidate power and continue to push through his policies, that could lead to a continuation of this strong market re-rating we're seeing in Argentina," said Malcolm Dorson, head of EM strategy at Global X.

Argentina logged twin primary fiscal and public sector financial surpluses in April. Inflation has also continued to dip, under the administration of President Milei.

This economic stability in the run-up to the midterm elections could prove beneficial for another Milei era, who already has the highest approval rating of any leader in nearly 20 years, as per Ashmore. It is well evidenced by the win the President's party secured in the wealthy capital Buenos Aires on Monday.

Meanwhile, Argentina's main stock index .MERV has gained close to 13% since the deal was announced.

"The deal will increase foreign investors' appetite and liking of Argentine equities because the backdrops are getting better... we've already started to see some gradual inflow, even though very small, given the risk-off environment we are in," said Vivian Lin Thurston, portfolio manager at William Blair Investment Management.

Ashmore also expects an incoming dollar bear market, which could be a tremendous tailwind for the peso and "could not have come at a better time".

(Purvi Agarwal)

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