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Argentinian Election Result - Buying the Dip

Goals

To be briefed on the Argentinian election result and whether it presents an opportunity for foreign investors interested in property and "buying the dip". Buying the dips refers to purchasing an asset after it has declined in price.

Early Findings

  • According to this source, "Buy the Dips" refers to purchasing an asset after it has declined in price. Buying the dips has different contexts, and different odds of working out, depending on the situation in which it is utilized. Some traders may say they are buying the dips if an asset is in a long-term strong uptrend. They hope the uptrend continues after the dip or drop. Others may use the phrase when no uptrend is present, but they believe an uptrend may occur in the future. Therefore, they are buying when the price drops in order to profit from a potential future price rise.
  • A surprise result in Argentina's primary election has sent the country's currency and stocks plunging Monday, with investors fearing that populists could replace the country's current, business-friendly government. When stocks plunge, experts state that this might be a good time to buy as this is a form of "buying in the dip".
  • Argentine President Mauricio Macri was snubbed by voters who appeared to hand a resounding primary victory to a populist ticket with his predecessor, Cristina Fernández. "Investors dumped its stocks, bonds and currency en masse in a selloff that left much of Wall Street wondering whether the crisis-prone country was headed for yet another default."
  • "Argentina’s peso plunged 15% after voters handed its president an election mauling."
  • This source gives a description of how the primaries work in Argentina and what the outcome was. It also provides analysis of what this means for the election that takes place on October 27th, 2019, as well as providing insights surrounding what the reaction has been.
  • Confidence in Argentina's economy is dwindling.
  • This source gives an excellent summation of how elections work in Argentina. For example, on August 11, Argentines voted "in primaries known as the Open, Simultaneous, and Obligatory Primaries (PASO), where candidates for the different parties who receive more than 1.5 percent of the vote will make it on the ballot for the general election on October 27. Argentina’s electoral system dictates that, to avoid a runoff, candidates need to win either 45 percent of votes or 40 percent with 10 points over the runner-up in the first round. Otherwise, the top two candidates will face each other in a second round on November 24. Presidents may run for consecutive reelection once, then must sit out one four-year term before qualifying to run again. The next president will be inaugurated on December 10, 2019. "
  • Refinitiv data showed Argentine stocks, bonds and the peso had not recorded this kind of simultaneous fall since the South American country's 2001 economic crisis and debt default.
  • Morgan Stanley downgraded its recommendation for Argentina's sovereign credit and equities from "neutral" to "underweight" and said calculations suggest the peso could fall another 20%.
  • According to Alejandro Bennazar, president of the Argentine Chamber of Real Estate, in Argentina, property prices are evaluated in dollars, and the majority of them are also purchased in dollars. This means that the plunging Argentine peso can raise the prices of homes.
  • This source discusses the uncertainty is the upcoming elections. "Investors still have burned in their minds the lost decade of the Kircheners and the damage it caused to Argentina’s reputation as a safe place to invest. It was a decade where corruption reached unbelievable levels even for Argentina and politicians had few limits on their power. Unless the current administration’s policies on transparency, the stamping out of corruption and the strengthening of the rule of law continue and are deepened then sadly we will little new investment in housing."

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