• Argentina’s economic situation: The economy is facing severe stagflation. Monetary and fiscal policy are extremely tight, consumer and investor confidence is low, and inflation is proving very sticky amidst wage indexation. Whilst we view the fiscal and monetary mix to be appropriate given Argentina’s macro challenges, it is possible that these measures may not be able to stabilise the economy in time for the elections.
  • Key elections scheduled in October: The current economic situation is weighing heavily on President Macri’s popularity and his re-election chances seem to have taken a turn for the worse. The incumbent’s approval ratings have plummeted over the past twelve months and Cristina Kirchner’s rejection rates have fallen. The incumbent now polls worse than Kirchner. That said, the political environment remains fluid, especially as the final list of candidates may not be known until June 22nd.
  • Investment views on Argentina: Asset prices have reacted very negatively over the past month to the rising chances of Cristina Kirchner returning to power. The direction of travel for Argentina under a Kirchner victory is likely to be one of debt restructuring, price controls and re-imposition of capital controls. We think Argentinian assets are sufficiently discounted for a scenario of Kirchner victory relative to the probability that we attach to such a scenario. As such, we hold on to our hard currency exposure in Argentina.