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ECONOMY | 22-06-2023 00:42

Election bet pushes Argentina’s Merval to highest since 2019

Index has climbed 43.7% in dollars so far this year to highest levels since PASO primaries four years ago.

Argentina’s S&P Merval stock index is climbing to its highest level in dollar terms since 2019 ahead of the nation’s presidential primaries in August.

The index, which tracks locally-traded shares of Argentine companies, climbed as much as five percent on Wednesday, following a holiday weekend in Argentina and after filling began on a key gas pipeline that promises to increase the nation’s gas exports later this year. 

Investors are positioning themselves in Argentine stocks ahead of a shift in the nation’s political cycle, said Francisco Choe, portfolio manager at Galicia Asset Management in Buenos Aires. The index has climbed 43.7 percent in dollars so far this year, to $853, its highest since Argentina’s last primary elections in 2019.

Markets collapsed that year after President Alberto Fernández staged a surprise electoral upset against former president Mauricio Macri in the nation’s primary elections. The index slumped to a low of $288 in 2020 amid the pandemic, and largely failed to recover as inflation accelerated toward triple digits and poverty increased.

Investors’ views have changed in recent weeks as cheap valuations push share prices higher with less than two months before the primary vote, according to Choe. Polls show voters rejecting the left-leaning ruling coalition in favour of a market-friendly candidate in the upcoming vote. 

Shares from energy distributor Edenor led gains on Wednesday, climbing as much as 19 percent, the largest daily move since August 2021. Shares from agriculture company Cresud and telecommunications provider Telecom Argentina also gained more than 10 percent.

“In Argentina, many investors see the stock market as the safe haven,” said Fernando Losada, a managing director at Oppenheimer & Co. “There are many companies that, despite Argentina’s difficult context, are healthy and do not have much debt.”

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by Scott Squires & Ignacio Olivera Doll, Bloomberg

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