By Camila Russo
Since
August President Cristina Fernandez de Kirchner, in a bid to stanch the
biggest drop in reserves in 11 years, has settled arbitration disputes
at the World Bank, revamped the country’s economic data at the request
of the IMF and agreed to compensate Repsol SA for the expropriation of
its stake in YPF SA. Photographer: Igor Russak/RIA Novosti via Getty
Images
UBS AG (UBSN) and Jefferies Group LLC
predict Argentina’s world-beating bond gains will fizzle. Former
Deutsche Bank AG (DBK) trader Luis Caputo is looking to bet as much as
$300 million they’re wrong.
Caputo, 49, said he raised $30 million in the first week
running Noctua International LLC’s Argentina fund and plans to
reach the $300 million goal in three to six months as he seeks
to capitalize on soaring demand for Argentine assets. The
country’s bonds have returned 21 percent since August, more than
any other nation tracked by Bloomberg indexes, when President
Cristina Fernandez de Kirchner failed to win enough votes in a
primary to seek a third term in next year’s election.
To Jorge Mariscal, the chief investment officer for
emerging markets at UBS Wealth Management, the gains are
unjustified as Argentina fails to tame inflation estimated at 37
percent or settle creditor claims from its $95 billion default.
Caputo, former head of emerging-markets trading at Deutsche Bank
before becoming CEO of its local unit, contends investors will
profit as Argentina repairs relations with the International
Monetary Fund and shores up its reserves.
“The government is making the necessary adjustments to
rebuild trust and improve accounts,” Caputo, whose 11-year
stint at Deutsche Bank ended in 2008, said in a telephone
interview from Buenos Aires. “Foreign investors are starting to
watch Argentina more closely, and when they realize its economic
and financial position is a lot more solid than other emerging
markets, stock and bond prices will continue correcting.”
Election Results
Yields on Argentina’s dollar-denominated bonds have plunged
1.5 percentage points since August to 10.76 percent, according
to JPMorgan Chase & Co. The yield is still the highest in
emerging markets after Ukraine and Venezuela.
The yield spread to U.S. Treasuries narrowed 15 basis
points to 780 basis points at 2:45 p.m. New York time.
Fernandez’s coalition garnered the fewest votes since 2003
in the Aug. 11 primaries to choose contenders for mid-term
congressional elections. The results ensured Fernandez’s
presidency, which followed that of her late husband Nestor Kirchner in 2007, will come to an end in 2015.
Economy Ministry press official Jesica Rey didn’t respond
to an e-mail message from Bloomberg News seeking comment.
Since August, Fernandez, in a bid to stanch the biggest
drop in reserves in 11 years, has settled arbitration disputes
at the World Bank, revamped the country’s economic data at the
request of the IMF and agreed to compensate Repsol SA (REP) for the
expropriation of its stake in
YPF SA. (YPF:US)
Fueling ‘Optimism’
“It’s what the market had been calling for, so it spurred
a lot of optimism,” said Caputo, who was also head of Latin
America debt trading at JPMorgan from 1994 to 1998.
Caputo, an Argentine, was also a director at Empresa
Distribuidora & Comercializadora Norte SA, the nation’s biggest
electricity distributor.
Ahmad Zuaiter, who was a money manager at Soros Fund
Management from 2006 to 2011 before founding Dubai-based hedge
fund Jadara Capital Partners Ltd., said in a telephone interview
that he began buying Argentine bonds and American depositary
receipts after the election results in August. He declined to
provide additional details.
Investors are overly optimistic about Argentina, according
to UBS’s Mariscal.
Singer Battle
“There’s still a long way to go,” he said in a telephone
interview from New York. “The markets are anticipating great
results while the root issues are far from being solved.”
Argentina’s fiscal deficit widened to 7.8 billion pesos
($971 million) in February from 526 million pesos a year earlier
as spending rose 42.1 percent. Reserves, which the country has
used since 2010 to pay debt, are hovering near a seven-year low
at $27.8 billion.
Holdout creditors led by Elliott Management Corp.’s Paul Singer have won lower court rulings to be paid in full at the
same time Argentina services its restructured debt. The effects
of the ruling are on hold pending an appeal to the U.S. Supreme
Court.
About 93 percent of creditors accepted losses of 70 percent
in the restructurings in 2005 and 2010. Argentina has said
paying holdouts in full could expose it to $15 billion of claims
that would lead it to default again, while the court orders the
country to pay $1.4 billion.
“It’s not the same risk-reward we had a year ago after
impressive gains,” Siobhan Morden, the head of Latin America
fixed-income strategy at Jefferies, said by phone from New York.
“We’ve seen most of the double-digit returns. Change has been
minimal and investors seem to trade more on headlines than
fundamentals.”
‘Significant Value’
Daniel Freifeld, who founded hedge fund Calloway Capital
LLC last year after serving as a senior adviser to the U.S.
State Department, said he’s betting Argentine bonds will
continue to rally after he began investing in the securities in
August.
“Argentina is one of the last markets that offers
significant value across all assets,” he said in a telephone
interview from Washington. “It’s a country with a set of
eminently solvable problems. All of the fundamentals, from human
capital to natural resources, infrastructure and relatively low
level of social problems, combined with prices, makes it an
attractive market.”
To contact the reporter on this story:
Camila Russo in Buenos Aires at
crusso15@bloomberg.net
To contact the editors responsible for this story:
Brendan Walsh at
bwalsh8@bloomberg.net;
Michael Tsang at
mtsang1@bloomberg.net
Lester Pimentel, Bradley Keoun
Por otro lado, Binner se refirió a los dichos del jefe de Gabinete
Jorge Capitanich sobre el narcotráfico en Santa Fe: "Me parece un
desatino total, no puede desacreditar una fuerza política de la cual no
pertenece".
