Accorsing to a report from the Wall Street Journal: "Worries about the country’s thinning foreign-exchange-reserves helped spark a more than 15% decline in Argentina’s currency, the peso, on Thursday.
Turbulence in the currency market spilled over into stocks. U.S.-listed shares of energy giant YPF SA tumbled 12% Thursday, adding to an 8.9% decline on Wednesday''.
“Things are rapidly coming unglued,” says Dave Lutz, head of trading at Stifel Nicolaus.
''Marc Chandler, global head of currency strategy at Brown Brothers Harriman, voiced worry that Argentina’s woes may spread across the developing world:
Brazil is the most exposed to Argentina with regards to trade flows, but those risks have declined. Argentina is Brazil’s third largest trading partner behind the US and China, in both exports and imports. Through 2005, Argentina was Brazil’s number two trading partner but was then supplanted by China. As a side note, China supplanted the US as Brazil’s number one trading partner in 2009. So, any collapse in Argentine GDP and/or equities should not have a huge spillover on Brazil. However, given the overall negative bias on EM in general, there will likely be some collateral impact on EM as a whole.While many investors have stayed clear of these two problem countries, we highlight the risk of contagion.
BBH also notes that the MSCI Argentina stock index was the best performer in the emerging world in 2013, up 64%. But things have taken an abrupt turn lower:
With a big devaluation in the works as well as a potential debt crisis, we do not see how Argentine equities can continue to perform well. We see a sharper and deeper correction ahead for this market.
Rising inflation and government controls have stirred social unrest in the country in recent months. President Cristina Kirchner failed to assuage those concerns on Wednesday, sidestepping the growing economic problems in her first public comments in six weeks''.
