Fears of a full-blown financial crisis in Argentina have once again come rushing to the fore.
In the wake of Argentine President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse in a selloff that left much of Wall Street wondering whether the crisis-prone nation was headed for yet another default.
The upset, widely seen as a preview of October’s presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the international markets.
Photo: Reuters
It deepened worries his populist opponent, Alberto Fernandez, and Fernandez’s running mate, former president Cristina Fernandez, will try to renegotiate its debts as well as its agreements with the IMF.
The nation has billions in foreign-currency debt due over the coming year.
“The market is starting to price in default,” said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Asset Management.
“The market is unwilling to give [Alberto] Fernandez the benefit of the doubt,” he added.
Credit-default swaps showed that traders were pricing in a 75 percent chance that Argentina would suspend debt payments in the next five years. On Friday last week, the likelihood was just 49 percent.
Its US dollar-denominated government bonds lost about 25 percent on average, pushing down prices to as low as US$0.55 on the dollar. Yields on shorter-maturity notes soared past 35 percent.
The peso on Monday tumbled as much as 25 percent to a record-low 60 per US dollar and the Merval stock index lost the most ever in intraday trading.
Argentina has a long history of fiscal crises and it was only in 2016, under Macri, that the nation put its most recent sovereign default behind it. Argentines still remember the 15-year default saga and deep recessions following a record default in 2001.
The government and its subsidiaries currently have US$15.9 billion in debt payments denominated in dollars and euros due this year, according to data compiled by Bloomberg.
There are another US$18.6 billion in bond principal, loans and interest payments issued in pesos.
Investors are fearing the worst.
Alberto Fernandez was Cabinet chief under former Argentine president Nestor Kirchner, while his vice presidential pick, Cristina Fernandez, led the republic for eight years before Macri came to power.
During her time in office, Argentina was marked by currency controls, data manipulation and protectionist policies on trade to protect national industry. It was also punctuated by another default that made the country an international pariah for years.
“The hopes of Argentina becoming a sustainable, well-functioning economy have been shattered for now,” said Patrick Wacker, fund manager for emerging-market fixed income at UOB Asset Management Ltd in Singapore. “I do not see a silver lining in the results.”
The company expects to cut its exposure further on Argentine bonds once prices stabilize, he said.
“It is going to be an extremely tough period for Argentinian assets,” said Marcin Lipka, a senior analyst at brokerage Cinkciarz.pl in Zielona Gora, Poland. “Without moderation of the Fernandez duo and regarding increasing expectations of another fight with the IMF, I would not exclude that the peso could hit 100 level to the [US] dollar in the next 12-month period.”
In a press conference on Monday, Macri said he still has a shot to reverse the trend in October and that his economic team is working on measures to address voter concerns on the economy.
He also said that the market and international community lack confidence in Alberto Fernandez and the opposition as evidenced by the selloff.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day