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Foreign investors led by the likes of Stanley Druckenmiller and major Wall Street banks are returning to Argentine stocks this year after some had exited ahead of 2025’s volatile midterm election cycle.
Flows into the Global X MSCI Argentina ETF, the country’s main outlet for equity investors abroad, are up by $63 million so far this year partly on market optimism that MSCI could reclassify the fund during a June review.
An upgrade could trigger automatic inflows into Argentine assets from passive funds that track frontier or emerging-market indexes. Argentina’s current standalone status limits access to international funds that can invest only through those benchmark baskets.
That makes up for some of the $192 million in outflows that had been driven by uncertainty around Argentina’s midterm vote. Still, the ETF is up by about $500 million since President Javier Milei’s first full year in office.
More broadly, Argentina’s stock index, S&P Merval, jumped nearly 10% in May in dollar terms, to its highest level since Milei’s party came back to win the October vote after weeks of a market selloff. Since that election, it’s up 54%.
Druckenmiller’s Duquesne Family Office, which bought and sold prior stakes in Argentine stocks, purchased $128 million in state-run energy giant YPF SA, according to first-quarter regulatory filings. YPF’s shares are at a 20-year high, boosted by rising oil production in the nation’s shale fields. Duquesne also added to its position in oil driller Vista Energy SAB and the MSCI Argentina ETF.
A spokeswoman for Duquesne Family Office did not immediately respond to a request for comment from Bloomberg News.
A big supporter of Milei’s free-market ideology, Druckenmiller bought Argentina’s five most liquid US-listed stocks in 2024 after hearing the libertarian’s speech in Davos. But the veteran investor also had to navigate the nation’s political swings: he cut exposure months before last October’s midterm elections and came back strongly after Milei’s coalition won decisively.
In the first quarter, Morgan Stanley, UBS and Goldman Sachs Group Inc. also bought up Argentina’s ETF, filings show, while JPMorgan Chase and Co. scooped up shares of Vista, and Citigroup invested in Argentina’s largest private bank, Grupo Financiero Galicia.
It’s a welcome turnaround — especially for market veterans who recall Argentina’s election-fueled market meltdown in 2019, when voters booted pro-business leader Mauricio Macri out of office for a Peronist government. The ETF tanked more than 30% back then.
This year’s trend stops short of major wave of foreign direct investment into Argentina’s real economy, which is undergoing an uneven recovery under Milei. While the nation’s energy and mining sectors are thriving, construction and manufacturing activity is still below levels seen before Milei took office. Dimmed growth forecasts have kept Argentine sovereign bonds mostly flat this year after sharp gains early in Milei’s term.
“The biggest interest is in buying stocks rather than Argentine bonds, because investors see much more upside in names such as YPF, Vista or Pampa — especially in energy — than in sovereign debt,” said Alberto Ades, head of research and strategy at hedge fund NWI Management.
Underpinning the optimism in equities is the possibility that MSCI could reclassify its Argentina ETF this month. An upgrade to frontier-market status could trigger passive inflows for Argentine stocks. MSCI kept Argentina a step below frontier as a standalone market last year, even though a large part of the market had expected an improvement.
“The market is expecting an upgrade for Argentina,” said Daniel Chodos, a partner at Dhalmore Capital in Buenos Aires. “In general, non-passive funds try to get ahead of” reclassifications.
Chodos adds that other factors are fueling investor optimism in Argentina now, too. The central bank has steadily increased its once depleted foreign reserves, while the peso has remained unusually stable amid global market volatility stemming from the war in Iran. A series of major investments mostly related to energy and mining have also added to the momentum in Argentine equities.
If MSCI eventually notches Argentina up two levels to emerging market status, local equities could see about $5 billion of inflows, according to Nikolaj Lippmann, LatAm Equity Strategist at Morgan Stanley.
“If you build sustainability on the policy side beyond 2027, you really have a lot of capital coming from the mining space, energy space and global capital markets,” Lippmann said.
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