Musk Backs Argentine Stocks; ARGT ETF Up Amid Reforms

Key Takeaway

• Elon Musk's endorsement of Argentine stocks post-Milei's election victory spurred a 1% rise in ARGT ETF, marking its eighth gain in nine sessions.
• Argentina's central bank cut the benchmark interest rate to 50%, amidst slowing inflation and achieving the first budget surplus in 16 years.
• IMF's $4.7 billion disbursement and billionaire Stanley Druckenmiller's investment reflect growing international confidence in Argentina’s economic reforms.

Musk's Endorsement Boosts Argentine Assets

Elon Musk, the renowned entrepreneur, recently expressed his support for investing in Argentina through a post on the social media platform X. This endorsement came amidst growing investor confidence in Argentina under the leadership of President Javier Milei. Following Musk's statement, the Global X MSCI Argentine ETF (ARGT), which tracks the performance of leading Argentine stocks, saw an increase of over 1% in New York markets. This rise marks the ETF's eighth gain in nine sessions, leading to a 54% rally since Milei's election victory in November 2023. The positive sentiment also extended to Argentine fixed-income assets, with dollar-denominated bonds maturing in July 2030 reaching 55 cents on the dollar, more than doubling their value since Milei's election.

Milei's Economic Reforms Attract Attention

President Javier Milei, known for his libertarian views, has implemented several economic reforms that have garnered attention from investors worldwide. Argentina's central bank recently cut the benchmark interest rate by 10 percentage points to 50%, marking the fifth adjustment since December and the third in three weeks. This decision was influenced by a noticeable slowdown in monthly inflation, which had surged to 25% at the end of 2023 but slowed to 11% in March, lower than the anticipated 12.1%. Furthermore, Milei's administration achieved the first budget surplus in 16 years in the first quarter of the year, a significant milestone for Argentina's fiscal management.

International Support and Market Confidence

The International Monetary Fund (IMF) has praised Argentina for its "ambitious stabilization plan," highlighting the country's progress in restoring macroeconomic stability. In February, the IMF approved an immediate disbursement of $4.7 billion to Argentina, part of a larger effort to support the country's economic reforms. This brings the total IMF disbursements under the current arrangement to approximately $40.6 billion. Additionally, billionaire investor Stanley Druckenmiller expressed his confidence in Argentina's new capitalistic approach under Milei, investing in five of the most liquid American Depositary Receipts (ADRs) for Argentinian companies. Druckenmiller's investment, inspired by Milei's free-market policies, has contributed to the positive performance of U.S.-traded Argentinian stocks, particularly in the financial sector.

Street Views

• Julie Kozack, IMF (Bullish on Argentina's economic reforms):

  "Argentina for its 'ambitious stabilization plan,' noting the country’s progress in restoring macroeconomic stability."

Management Quotes

• Javier Milei, President of Argentina:

  "If the state does not spend more than it collects and does not issue (money), there is no inflation. This is not magic."