Monday , June 14 2021

Argentina just suffered the second largest collapse of 1950 for any stock market – and the nation is again on the brink of a financial crisis

argentina REUTERS / Marcos Brindici

  • Argentina is on the verge of a financial crisis after shocking primary elections saw President Mauricio Macri lose out to Alberto Fernandez and his ruling half, Cristina Fernandez de Kirchner.
  • The S&P Merval Index fell 48% on Monday, the second largest one-day drop in any stock market since 1950.
  • The Argentine peso fell 15% against the US dollar on Monday and extended its losses on Tuesday.
  • Investors worry that Argentina will pay its debt again.
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Argentina is on the verge of a financial crisis after its current leader, President Mauricio Macri, was defeated by a left-leaning primary in the country this weekend by more than expected margins.

The stunning loss sent the Argentine markets. The S&P Merval Index fell 48% on Monday, the second largest one-day decline in any global stock market since 1950, according to Bloomberg, The Argentine peso also fell, losing 15% of its value against the US dollar on Monday and falling further to a new low on Tuesday.

Investors fear that if Macri fails to win a second term in October, leftist leftist Alberto Fernandez and his ruling half – former leader Cristina Fernandez de Kirchner – will cancel the progress Macri has to make to invest again. abroad.

The conservative leader joins a nation-wide campaign to secure a record $ 56 billion in bailouts from the International Monetary Fund in 2018. If Macri loses, Fernandez could try to renegotiate Argentina's debt with the IMF.

Argentina has billions of dollars in foreign currency debt next year, according to Bloomberg – in 2019, $ 15.9 billion in debt and another $ 18.6 billion in bonds, loans and interest are due.

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In the weekend weekend, Macri took home only 32% of the vote, while Fernandez won 47%. The 15-point gain was much higher than investors expected, Bloomberg reported.

Investors are now running away from the country's assets in divisions, with industry leading observers wondering if default is on the horizon. The country has struggled with fiscal policy for years and failed before – once in 2001 and again in 2014 with then-President Fernández de Kirchner.

On Monday, credit default swaps revealed that traders are pricing a 75% chance for Argentina to suspend debt payments over the next five years, more than the 49% probability that was set on Friday, Bloomberg reported. Government bonds have fallen by an average of 25%, with some prices falling to 55 cents on the dollar, according to Bloomberg.

Even Argentina's 100-year bonds have sunk to a new low. The 100-year government bond was issued about 2 years ago for $ 90 at a rate of 7.125%, according to Bank of America Merrill Lynch.

Macri is still hoping to turn the result around in October. At a news conference on Monday, he said his economic team was working to address voters' concerns about the economy, but that the market showed there was no widespread confidence in his opposition, Bloomberg reported.

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