Friday, July 8, 2011

Today's Major Market Move - Argentine Equity Index Up 14% in Past 30 Days

The majority of the world's equity indexes have been doing well in the past 30 days, primarily because of the recent progress being made on the second Greek bailout (whether or not this equates to progress in the long term is a separate discussion). The equity market that has performed the best is the M.AR Merval Argentina IX which has gained 14.6% since June 8th.

Part of the rise may be due to the relative regional weakening of the Argentine Peso compared to its neighbors' currencies. Since the beginning of the year, the Peso is down 2% vs. the USD dollar while the Brazilian Real, the Chilean Peso and the Uruguayan Peso are up 6.6%, 5.8% and 7.5% respectively.

According to this article in the Wall Street Journal, the equity gains may be transitory and the better bet going forward may be in government bonds.
"The stock market is likely to face volatility and gains will be limited at least until the elections," said Silver Cloud Advisors chief research analyst Javier Salvucci.

While big question marks hang over stocks, traders see opportunities in government bonds, which still offer attractive yields. According to Bank of America Merrill Lynch Global Research, euro- and dollar-denominated GDP warrants are among the highest yielding emerging-market, fixed-income securities right now.

That article also states that Argentina expects around 9% of GDP growth in 2011, but that doesn't jive with the IMF estimate, which predicts only a little over 3% growth. Here's a chart of the IMF estimates for GDP growth of major economies in the region (along with the United States).

(Click on the images for a larger view.
Click here for the current performance of global equity indexes.
Click here for a chart of global gdp estimates.)

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