Emerging markets fund managers are confident the fiscal programme of President Mauricio Macri's government is capable of overcoming the "short-term noise" of Argentina's current economic crisis, but warn the country faces a number of obstacles in reforming its "serial defaulter" reputation.
Argentina's central bank took the drastic decision to hike its key interest rate by 15 percentage points to 60% on 30 August after the peso suffered its greatest decline since the currency first floated in 2015. It continues to be the worst-performing currency in 2018, falling by more than 50% against the dollar since 1 January.
The country's president Mauricio Macri had pleaded with the International Monetary Fund (IMF) a day previously to quicken its delivery of a $50bn bailout package, travelling to Washington on 4 September in an attempt to secure the funding.
On the same day, the country announced wide-reaching austerity measures, far beyond the IMF's targets set in may, in efforts to tackle the mounting emergency created by the currency crisis.
Argentine officials said after the meeting they expect the funding to be secured by late September and its budget will be balanced by next year, with a surplus to develop by 2020.
The most recent stage of the crisis also follows the warning from ratings agency Standard & Poor's - having already relegated the country's credit rating to a B+ - that it could downgrade Argentina further as a result of the potential for the peso's decline.
Bond yields have also been in rise, with a 10-year government bond currently yielding around 17.6%, up from just over 15% six months ago.
The fallout from the crisis has hit a number of bond investors including Franklin Templeton, which bought $2.2bn (£1.7bn) of Argentine bonds in May, according to the FT. The $38bn Global Bond fund, run by Michael Hasenstab, was down 2.6% throughout August, according to FE.
PIMCO is the country's largest bondholder, with $5.3bn (£4.1bn) worth of positions as at the end of March, while BlackRock, GSAM and Fidelity are the country's other largest creditors.
Senior portfolio manager in GSAM's emerging market debt team Angus Bell said issues in the Argentine economy had been compounded by challenges in other emerging market countries like Turkey.
He explained: "The continued softening in sentiment more broadly across EM has further eroded market confidence on the situation in Argentina."
Bell added that GSAM views recent moves by policymakers as "significant" enough to "strengthen market confidence in the near term", but it warns "the effectiveness of these measures appear to have diminished as adverse market forces have intensified".
He added: "We continue to expect positive outcomes for Argentinian assets in the medium term, we have actively reduced our [peso] position over the month to be now sized as a mild overweight.
"On all metrics we assess the currency as being significantly cheap to fair value, and now with real interest rates above 30% policymakers are showing credible determination in responding to the crisis prudently.
"Additionally the external pressures that have faced the economy, evident in the current account deficit, should begin to stabilise given the extent of currency weakness and prudent monetary policy."
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