Trump’s Potential Return Fuels Emerging Market Bets as Investors Seek ‘Next argentina’
BUENOS AIRES/LONDON – A potential shift in U.S. policy under a second Trump governance is driving a surge in bets across emerging markets, with investors hunting for countries poised to benefit from a recalibration of geopolitical and economic dynamics – a phenomenon some are calling the search for the “next Argentina.”
The anticipation of altered U.S. approaches, particularly regarding venezuela and Ukraine, is already impacting asset prices, while a perceived moderation of leftist policies in brazil under President Luiz Inácio Lula da Silva is further bolstering optimism. this comes as emerging-market assets broadly gain amid investor flight from U.S. markets, supported by debt restructurings, IMF deals, and commodity rallies. however, historical precedent suggests proximity to the U.S. doesn’t guarantee benefits – India’s Narendra Modi, for example, has yet to secure a trade deal with the U.S. despite efforts.
“Where we are expecting change, it’s because electorates are frustrated with the incumbents,” said Graham Stock, senior emerging-markets sovereign strategist with RBC Bluebay, pointing to dissatisfaction in Chile and Colombia with current leadership.
In Latin America,a tougher stance from Trump toward Venezuela is already boosting the country’s defaulted bonds,some of which have doubled in price as traders speculate on the potential ouster of Nicolás Maduro. ”The probability of regime change has become a lot higher - we’ve gone from no hope of anything changing to somthing closer to 50/50,” said Gramercy’s Atanasov.
Eastern European currencies and Ukraine’s dollar bonds also jumped Monday following news that Ukrainian and U.S. negotiators had prepared a framework for a peace deal, spurred by Trump’s proposed November 27 deadline to secure Ukraine’s support for the plan. While the deadline isn’t firm,according to U.S. Secretary of State Marco Rubio, the growth highlights the influence of the U.S. election on regional markets.
Even in hungary, Prime Minister Viktor Orban has publicly suggested the possibility of an Argentina-like rescue, a notion that has puzzled investors amid a strong rally in emerging assets.
