Argentina stocks suffer worst week since Feb 2024 after Milei's Buenos Aires loss

[Argentine flag waving in a gate of a field. Golden color, hills, beautiful sky with clouds and grass]
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Argentina's flagship stock index cratered nearly -12% this week, its heaviest such loss in over a year and a half, after President Javier Milei's party suffered a heavy loss in local elections, stoking investor concerns over his government's ability to implement its major economic reform agenda.

Milei's party lost to Peronist opposition in legislative elections in Buenos Aires last Sunday, a province that accounts for nearly 40% of Argentina's electorate. The 13-point victory for the Peronists indicated that Milei could be in for a tough battle in key national midterm elections in October. The fallout in the stock market on Monday was significant [https://seekingalpha.com/news/4493059-argentina-stocks-and-us-listed-etf-tumble-amid-rising-political-uncertainty], with the S&P MERVAL index (MERVAL [https://seekingalpha.com/symbol/MERVAL]) plunging -13.3%. For the week, the gauge is -11.9%.

The reaction in currency markets was perhaps even more eye-catching, with the Argentine peso plumbing historic lows against the U.S. dollar. Milei came to power in December 2023 with promises to shock Argentina's beleaguered economy back to life, and as part of his initial moves, he devalued the peso over 50% to the dollar.

"Argentina could have broken with the past when it devalued in Dec. '23. That was its golden opportunity to do a free float, but instead it re-pegged the Peso, which then rose massively in real terms (red) due to high inflation. Now - once again - the Peso is massively overvalued," Robin Brooks, senior fellow at the Brookings Institution and an ex-Goldman Sachs FX strategist, said on X (formerly Twitter) this week.

More than a year into Milei's leadership, Argentina has continued to struggle with economic growth and poverty rates, though its high levels of inflation have fallen sharply through his policies.

The Global X MSCI Argentina ETF (NYSEARCA:ARGT [https://seekingalpha.com/symbol/ARGT]), which provides U.S. investors with exposure to Argentine equities, slid -10.6% on Monday and is -10.6% for the week as well.

Other Argentina-related stocks include Banco BBVA Argentina (BBAR [https://seekingalpha.com/symbol/BBAR]), Grupo Financiero Galicia (GGAL [https://seekingalpha.com/symbol/GGAL]), Grupo Supervielle (SUPV [https://seekingalpha.com/symbol/SUPV]), Banco Macro (BMA [https://seekingalpha.com/symbol/BMA]), YPF S.A. (YPF [https://seekingalpha.com/symbol/YPF]), Pampa Energía (PAM [https://seekingalpha.com/symbol/PAM]), and Cresud S.A.C.I.F. y A. (CRESY [https://seekingalpha.com/symbol/CRESY]).

MORE ON ARGENTINA

* ARGT: Long-Term Bullish, Short-Term Speculative Until October Elections [https://seekingalpha.com/article/4820860-argt-long-term-bullish-short-term-speculative-until-october-elections]
* ARGT: Still Strong Fundamentals, But Political And FX Volatility Change The Call (Downgrade) [https://seekingalpha.com/article/4819403-argt-still-strong-fundamentals-but-political-and-fx-volatility-change-the-call-downgrade]
* ARGT: The Best Stocks In This Fund Are Not Pure Argentina Plays [https://seekingalpha.com/article/4808652-argt-the-best-stocks-in-this-fund-are-not-pure-argentina-plays]
* Ex-Treasury head Summers says Trump’s policies 'scarily reminiscent' of Argentina’s Perón [https://seekingalpha.com/news/4481653-ex-treasury-head-summers-says-trumps-policies-scarily-reminiscent-of-argentinas-peron]
* Seeking Alpha’s Quant Rating on Global X MSCI Argentina ETF [https://seekingalpha.com/symbol/ARGT/ratings/quant-ratings]