South Africa: Argentinian Disaster Has Lessons for SA Investors

analysis

Monday's collapse in the value of the Argentinian peso and crash of that country's stock market should alert SA investors to the dangers of keeping all your eggs in one basket.

The Argentine peso fell by 30% and its stock market by 37% on Monday 12 August, the worst market collapse for the country in decades. In dollar terms the second-largest single-day drop in any global stock market since 1950, according to Bloomberg. (The worst was Sri Lanka.)

The peso fell further on Tuesday before stabilising on Wednesday at 18 US cents to one peso.

Some of Argentina's largest companies, including oil giant Pampa Energy and banking heavyweights Financiero Galicia and Banco Macro, saw their shares fall by as much as 47% as investors panicked, selling stocks and bonds and pushing the nation once again to the brink of a financial crisis. The country has defaulted on its debt eight times since independence from Spain in 1816.

The panic was triggered by unexpected primary election results which suggest that Alberto Fernández and former president Cristina Fernández de Kirchner will beat President Mauricio Macri by a wide margin come the elections in October. If that happens, investors fear an economic collapse...

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