Robeco, an investment firm, is returning to Argentina's market after a nine-year hiatus, driven by recent credit rating upgrades and economic reforms. This move is led by Erik Keller, a senior portfolio manager at Robeco who manages $18 billion across various funds. The firm had divested from all Argentine holdings in 2017 after a market decline and the previous government's policies led to concerns about capital controls and defaults.
Keller states that Argentina's valuation has become compelling following the upgrades from major credit rating agencies like Moody's, Fitch, and S&P Global Ratings. These agencies have raised Argentina's sovereign credit rating to B- with a stable or positive outlook, marking the first time in over a decade that all three are aligned at this level. This facilitates investment from institutional mandates that require a minimum rating from multiple agencies.
The improved outlook is attributed to sustained fiscal surpluses, decreasing inflation, and continued economic liberalization under the current administration. The government's focus on fiscal austerity and a strong commitment to reforms has boosted investor confidence. Argentine assets, including bonds and stocks, have seen significant gains, with some bank ADRs surging by more than 5%. The country's risk premium, measured by the JP Morgan EMBI index, has also compressed to around 410 basis points, nearing its lowest level since 2018.
While some investors had already anticipated the rating upgrades, analysts like Federico Fillipini and Javier Casabal of Adcap Grupo Financiero believe there is still room for further convergence in bond spreads, particularly for longer-dated instruments like GD35 and GD38. The government is expected to prioritize lower-cost financing sources, including multilateral funding and local debt issuances, before a full return to international debt markets. Multilatinas and local investors were the first to re-enter, with more selective European and North American investors now following suit.
