No surprise in Argentina last week: Cristina Fernandez Kirchner has been reelected. But what happens next to the Argentine currency — and the fledgling Argentine ETF ARGT (quote) – could surprise quite a few people.
Kirchner won by a relative landslide, while her party, the Frente Para la Victoria, also handily took Buenos Aires and might have taken the reins in the key province of Mendoza as well.
This gives Kirchner a strong majority in both houses of the Argentine congress and even tighter control of the country. Unless she changes her economic policy, economists are already looking toward the possibility of a hard landing in 2012.
While they do not see a steep post-election devaluation in the peso, traders are betting that the currency will deteriorate at least 10% in the next few months.
If Kirchner tries to clamp down on capital fleeing this already-underowned market, things could get even worse.
Either way, the long-awaited Argentine ETF looks primed for even more downside from here. Since launching in March, ARGT is down 27%:
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