Morgan Stanley Anticipates a 133%/258% Stock Market Return in Argentina in Five Years

January 11, 2017


Investors betting on Argentina's stock market could make a return of 258% in five years, according to analysts at Morgan Stanley. Argentina is returning to economic and political normality after years in the capital markets wilderness following its 2002 debt default and financial collapse, Morgan Stanley said in a note to clients.

While a 258% return on Argentine stock investments is the best-case scenario, the investment bank said a 133% return is the most likely.

“We believe the deepening of Argentina’s capital market will trigger roughly US$230 billion in net financing and foreign direct investment over the next five years, and we expect Argentina’s role and prominence in fixed income and equity investment portfolios to grow,” the analysts said.

”The journey has just begun and it is not too late to buy Argentina: In our base case scenario, we forecast MSCI Argentina should reach circa 5,700 points by 2021YE (+133% in USD; +18% CAGR).“

The analysts said that returns could top 250% if economic reforms are implemented quickly: ”In an optimistic scenario, the economy quickly normalizes and the government is able to implement far reaching structural reforms that lift potential real GDP growth to +4.0% per year.“

”This backdrop would be extremely supportive for equities and we project MSCI Argentina to close to 8,800 points after 5 years (+258% in USD; +29% CAGR),” Morgan Stanley said.

If things do not go to plan, the most Morgan Stanley sees investors losing over that period is 18%, making the risk worth the potential reward.

Fifteen years after defaulting on more than US$90 billion of sovereign debt, Argentina returned to the bond market in April last year. The country raised around US$15 billion from its bond sale, but attracted orders worth US$65 billion.

While former President Cristina Fernandez de Kirchner struck a combative tone in her dealings with bondholders, new President Mauricio Macri made finalizing negotiations with creditors and issuing new debt a policy priority.

Tags: argentina, morgan stanley, stock market
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