Does the Argentine crash trigger a butterfly effect? Expert: Dont panic, the conductivity is limited.

category:Finance
 Does the Argentine crash trigger a butterfly effect? Expert: Dont panic, the conductivity is limited.


The populist National Front was so strong in the primaries that the market was shocked by the unexpected result. Argentinas capital market responded with the tragic performance of three killings of stock and bond exchange after the opening of the market.

Faced with the aggressive opposition, Markley vowed on October 12th to reverse the situation in the first round of voting in the presidential election of Afghanistan on October 27th. However, he also acknowledged that the devaluation of the currency caused by the rise in opposition support would exacerbate Argentinas already severe inflation.

Limited conductivity

Fearing that the opposition would win directly in the first round of Octobers general election and then return to interventionist economic policy, the Argentine Peso fell 15% in a day and fell about 30% in the middle of the day. Subsequently, Argentinas central bank urgently intervened to sell $105 million in the foreign exchange market to defend the peso that had been sold on a large scale. Traders said it was the first time since September that the Argentine central bank had used its reserves to save itself.

Edward Glossop, a macro Latin American economist at Kaishou, predicts that the Argentine Peso will continue to depreciate and that it is entirely possible to fall to $1 to 70 pesos.

Several Argentine stocks listed in the United States fell sharply, and the Argentine Merval index closed down 31% on the 12th. The countrys benchmark 10-year bonds and century bonds fell by 18% to 20% of their face value, bringing the transaction price down to 60% of their face value.

Morgan Stanley has downgraded its recommendation rating for Argentinas sovereign credit and stock from neutral to underweight, and said calculations suggest that the Argentine Peso could fall another 20%. We believe that a high degree of policy continuity is a necessary condition for maintaining macroeconomic stability, Morgan Stanley said in a research report. Argentine bonds will face further downward pressure and volatility.

WinThin, head of global monetary strategy at Brown Brothers Harriman in New York, said he believed the butterfly effect of the slump in emerging markets was transmitted to neighbouring countries such as Brazil and Uruguay, given the volume of trading.

Many other market participants hold the same view that the huge fluctuations in Argentinas financial market lie in the weak domestic economic base and the unexpected events that cannot be digested. These factors have limited contagion on the international financial market and the possibility of a collective collapse of emerging market currencies is small.

During the 12-day European trading period, the emerging market currencies Turkish lira, South African Rand and Mexican Peso all fell by about 1%, not dramatically.

Its difficult to pull back a game.

The current president, Markey, came to power in 2015, promising to revive Argentinas economy as Latin Americas third largest economy with a free market policy, while working to improve transparency, open markets and relations with the United States. However, Argentina has not been able to get out of the economic crisis. High unemployment, high inflation and other issues have been plaguing the Markley government.

Argentinas economy suffered a financial crisis in 2018, forcing the Markley government to accept loans from the International Monetary Fund (IMF), in exchange for Argentinas commitment to reduce fiscal expenditure and balance the deficit.

To fulfill its commitment to basically eliminate the government budget deficit by the end of this year, the Markley government is cutting expenditure by increasing tax revenue. He ordered the government to stop recruiting, cut subsidies for utilities such as electricity, and slash this years infrastructure development budget by 27%.

The need to cut back on food and clothing at once has obviously seriously affected the basic life of ordinary Argentine people. Fernandez, on the other hand, took advantage of votersaversion to the austerity policy by offering free medicines to retirees and raising wages for ordinary workers.

According to official statistics, the voting rate in the presidential primary is about 75%. Fernandez won 22 of the 24 constituencies and Buenos Aires, which was originally regarded as a vote box by the ruling party. The gap between the voting rates of the two sides is more than 20%.

In a press release, Markley said he was not considering a cabinet reshuffle. I believe that our October elections will be more balanced, so that we can enter the second round of elections, when there will be more people who do not want to go back to the past to join us. He said.

According to Argentine electoral law, in the first round of voting on 27 October, if a candidate wins more than 45% or 40% of the votes and 10% more than the second, he will be elected as the next president; otherwise, the first two candidates with the largest number of votes will vote in the second round of the general election.

Fernandez said that if he wins the October election, he would seek to revise Argentinas $57 billion standby financing agreement with the IMF. Currently, IMF spokesmen refuse to comment on the development of the political situation on the grounds that they are unable to comment on it.

Source: First Financial Responsibility Editor: Guo Chenqi_NBJ9931