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Montevideo, May 27th 2017 - 19:19 UTC

Morgan Stanley anticipates a 133%/258% stock market return in Argentina in five years

Tuesday, January 10th 2017 - 17:34 UTC
Full article 3 comments
While a 258% return on Argentine stock investments is the best-case scenario, the investment bank Morgan Stanley said a 133% return is the most likely. While a 258% return on Argentine stock investments is the best-case scenario, the investment bank Morgan Stanley said a 133% return is the most likely.

Investors betting on Argentina's stock market could make a return of 258% in five years, according to analysts at Morgan Stanley. Argentina is returning to economic and political normality after years in the capital markets wilderness following its 2002 debt default and financial collapse, Morgan Stanley said in a note to clients.

 While a 258% return on Argentine stock investments is the best-case scenario, the investment bank said a 133% return is the most likely.

“We believe the deepening of Argentina’s capital market will trigger roughly US$230 billion in net financing and foreign direct investment over the next five years, and we expect Argentina’s role and prominence in fixed income and equity investment portfolios to grow,” the analysts said.

”The journey has just begun and it is not too late to buy Argentina: In our base case scenario, we forecast MSCI Argentina should reach circa 5,700 points by 2021YE (+133% in USD; +18% CAGR).“

The analysts said that returns could top 250% if economic reforms are implemented quickly: ”In an optimistic scenario, the economy quickly normalizes and the government is able to implement far reaching structural reforms that lift potential real GDP growth to +4.0% per year.“

”This backdrop would be extremely supportive for equities and we project MSCI Argentina to close to 8,800 points after 5 years (+258% in USD; +29% CAGR),” Morgan Stanley said.

If things do not go to plan, the most Morgan Stanley sees investors losing over that period is 18%, making the risk worth the potential reward.

Fifteen years after defaulting on more than US$90 billion of sovereign debt, Argentina returned to the bond market in April last year. The country raised around US$15 billion from its bond sale, but attracted orders worth US$65 billion.

While former President Cristina Fernandez de Kirchner struck a combative tone in her dealings with bondholders, new President Mauricio Macri made finalizing negotiations with creditors and issuing new debt a policy priority.

Top Comments

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  • Zaphod Beeblebrox

    I guess they recognise that CFK dug such a deep hole that now that Macri has reversed her crazy policies, then things can only improve. The problem is the phrase “if economic reforms are implemented quickly” since the Ks will doggedly resist reform at every step by any means so I'd expect that any progress will be slowed by the various forms of inertia in Argentina. We shall see...

    Jan 10th, 2017 - 06:10 pm +1
  • golfcronie

    Is this the Morgan Stanley that borrowed US$ 107 billion from the Federal Reserves to keep in business?

    Jan 10th, 2017 - 10:22 pm +1
  • Marti Llazo

    It's hard to believe how disconnected the folks at Morgan-Stanley can be. Are they talking about the same Argentina? Didn't we hear this “it's not too late to buy Argentina” a year ago? For any sort of payoff of the type that they are hyping, a country has to be producing competitive goods and services. The Argentina we have here is in recession, plagued by unreliable and antediluvian institutions that aren't likely to be much improved for a decade or more, beset by deficit spending, constrained by an over-compensated and over-agitated workforce, still suffering from corruption, taking on billions in high-interest debt as might a drunken sailor, wallowing in decaying infrastructure and counterproductive government policies, and reminding the world of the insane level of risk involved in starting and running a profitable business here. I want to know what they're smoking at Morgan Stanley because it must be quite powerful shite.

    Jan 10th, 2017 - 10:36 pm +1
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