Banks are shrinking the size of their trading desks in Argentina after a rout sparked by the August 11 PASO primary election resulted in the return of currency controls and capital flight to the battered local market.
Banco Itau Argentina SA, BNP Paribas SA, Banco BBVA Argentina SA and HSBC Bank Argentina SA are among banks that cut their trading desks or relocated their traders, according to people with direct knowledge of the matter. The reason was the market drop after opposition leader Alberto Fernández trounced president Mauricio Macri in August primaries with a wider margin than was expected.
The concerns around a return to protectionist policies under a Peronist opposition were cemented on October 27 when Fernández beat incumbent Macri in the first round. He’ll take office on December 10. The benchmark S&P Merval almost halved in dollar terms, while bond spreads tripled to 22.92 percentage points since the primaries.
Representatives for Itau and BBVA declined to comment. BNP did not immediately reply to a comment request. A spokeswoman at HSBC Argentina confirmed the relocation of one of its traders and added that the position was replaced locally.
Banco Itau arranged the exit of the head of its trading desk, Sebastian Azumendi, formerly of UBS and Mizuho, who had returned to his home country of Argentina in 2017 as the market boomed. BNP Paribas let go traders Marcos Rodríguez Alcobendas. HSBC Argentina relocated FX trader Sebastián Rzezak to New York, a spokeswoman confirmed, and replaced him with Tomas Devito, formerly of Banco Patagonia.
BBVA’s Cesar Coppola, who had been hired from HSBC in October 2018, left the bank in mid-October. Shortly after he started a new role as head of investments at Binaria Compania de Seguros, the insurance company owned by health services company Grupo OSDE.
”My decision was unrelated to the current market situation – I was offered a great opportunity to return to the buy-side through a local group,” Coppola said. “In the medium term, I believe there will be more opportunities in the buy-side in Argentina than in the sell-side.”
The moves come as Argentina’s political risk leads foreign institutional investors to shy away from local assets. Banks started by cutting senior roles amid concerns on their budgets for the year ahead and that a Fernández government may put limits on layoffs.
Among the biggest blows to the sector were delays on the payment of local notes and FX controls, which limit banks’ ability to trade futures.
“The futures market was lost, as the instrument ceased to be used as a hedge and volume fell by 65 percent,” said Pablo Castagna, head of wealth management of local broker Balanz Capital.