It's a familiar refrain in politically volatile Argentina: politics and shoddy sovereign finances often impact financial markets in South America's second-largest economy and that has been the case again this year.
What Happened
Just look at the Global X MSCI Argentina ETF (NYSE:ARGT). The oldest and largest Argentina exchange traded fund listed in New York was on a torrid pace through the first seven months of 2019 only to fall on hard times falling a primary election that pointed to a new market unfriendly regime coming to power.
Stocks there have yet to recover as highlighted by ARGT residing almost 34% below its 52-week high and recovery will be difficult against the backdrop of another economic crisis.
Why It's Important
Further plaguing ARGT is concentration risk in the form of a 22.50% weight to Latin American e-commerce giant MercadoLibre (NASDAQ:MELI). That stock hasn't recovered from its slump after the Aug. 11 election results and with earnings looming on Oct. 31, investors could make another comment on the health of the Argentine consumer and further punish ARGT's largest component.
That's a reminder of ARGT's heavily cyclical tilt. The fund holds 26 stocks, about 45% of which hail from the consumer discretionary and energy sectors.
What's Next
Adding to the potential risks around ARGT are credit issues facing some of the fund's holdings.
YPF is ARGT's fifth-largest holding at a weight of 4.44%.
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