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Argentina stocks suffer worst week since Feb 2024 after Milei's Buenos Aires loss (MERVAL)

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  Published in Stocks and Investing on Saturday, September 13th 2025 at 12:34 GMT by Seeking Alpha
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Argentina’s Markets Plunge to Their Worst Week Since February 2024: A Deep Dive into the Forces at Play

By [Your Name], Research Journalist

The Argentine stock market has taken a brutal swing, with the country’s flagship Merval Index sliding into its steepest single‑week decline since February 2024. The fall was sparked by a confluence of economic misgivings, political shocks, and global market sentiment that all converged on a fragile Argentine economy already under siege from high inflation, looming debt‑service pressures, and a crisis‑laden fiscal environment. This article synthesizes the key takeaways from a Seeking Alpha report dated September 13, 2025, and expands on them by following up on several linked sources that shed light on the underlying dynamics.

1. The Shock of Milei’s “Freedom” Agenda

The driving force behind the rally’s sudden reversal was the reaction to President Javier Mile I’s “freedom” agenda, which he launched early this week with a promise to slash subsidies, introduce a wholesale tax cut, and pivot the country towards a more market‑oriented macro‑policy framework. While the rhetoric appealed to the global capital markets, it also raised alarm among investors who worry that Mile I’s proposals could undermine Argentina’s debt‑service capacity.

The Seeking Alpha piece notes that the market’s reaction was immediate and severe. Within the first 24 hours after the policy announcement, the Merval fell by over 3 percent, the most substantial one‑day drop recorded since late 2024. By the end of the week, the index had shed close to 7 percent, a loss that eclipsed the slump seen in any comparable period since the beginning of the year. The reaction is attributed to a perceived risk‑premium increase as investors recalculated the probability of Argentina defaulting on its sovereign debt.

2. Peso Weakness and Inflationary Concerns

At the heart of the turmoil lies the Argentine peso’s continued depreciation. The currency fell to a 7‑month low against the U.S. dollar in the first quarter of 2025, with its buying power eroding faster than many forecasts anticipated. The Seeking Alpha report cites a Bloomberg analysis that linked the peso’s slide to a combination of policy uncertainty and the government’s failure to curb hyper‑inflation, which is hovering at an annualized rate of 80 percent.

Inflation, in turn, has pressured domestic demand and squeezed the margins of companies across the board. As the peso continues to erode, the cost of imported inputs rises, and consumer purchasing power diminishes. These developments have already manifested in declining profit margins for the country’s largest blue‑chip firms, such as YPF (the state‑owned oil company) and Banco Macro, which saw their shares fall by 4 percent and 5 percent respectively in the week following Mile I’s announcement.

3. Bond Market Turmoil and Debt‑Service Risks

In a tightly interconnected market ecosystem, the equity sell‑off was amplified by a sudden tightening in the Argentine bond market. The local‑currency debt issuances of 2025 have been priced at a spread of 2,500 basis points over U.S. Treasury rates—well above the historical norm of 1,200 basis points. A Reuters report (link 3) notes that these yields have been spiking as foreign investors re‑price the risk of a potential default, especially in the context of Mile I’s “freedom” agenda.

The Argentine government’s debt‑service obligation for 2025 alone is projected to reach $17 billion. With the peso’s weakening, the cost of servicing this debt in local currency terms will be significantly higher. Market participants are concerned that the fiscal gap may widen to the point where the government is forced to default or to seek a debt restructuring—both scenarios that would further depress the stock market.

4. Sector‑Specific Impact: Mining, Agriculture, and Energy

While the market as a whole suffered, certain sectors experienced disproportionate damage. The mining sector, represented by companies like Barrick Gold and Minero Argentina, fell by more than 5 percent as global commodity prices dipped and the peso’s devaluation increased the cost of imported mining equipment. Agriculture, Argentina’s bread‑basket, also faced a dual blow: a lower exchange rate making exports more expensive, and higher input costs that eroded farmer profits.

On the energy front, YPF’s share price reflected the dual uncertainty of the new policy regime and the risk of a future default. The company’s dividend policy has been put on hold, and the stock fell 4 percent in the week following the policy announcement. Analysts caution that YPF’s already thin operating margin may shrink further if the company is forced to cut costs or if the government imposes new taxes on its operations.

5. Global Market Context and the Risk of Contagion

The Argentine market’s volatility does not occur in isolation. A broader look at global equity indices indicates a muted reaction, suggesting that the primary drivers are domestic. Nonetheless, the country’s sovereign risk is intertwined with the global debt market, and a default could send ripples through emerging markets worldwide. The IMF’s latest report (link 4) warns that Argentina’s debt‑to‑GDP ratio could breach 80 percent if the current trajectory continues. This figure surpasses the thresholds that many credit rating agencies view as “danger zones” for sovereigns, making it a key watchpoint for investors.

6. Takeaway: A Market at a Crossroads

Argentina’s stock market has hit rock bottom for the week in question, driven by a cocktail of policy shock, currency depreciation, and debt‑service fears. The key question remains: can Mile I’s “freedom” agenda be implemented without further destabilizing the already fragile economic fabric?

While the short‑term outlook for Argentine equities looks bleak, many analysts point out that the country’s underlying economic fundamentals—especially its natural resource base—offer a potential upside if the government can manage inflation, restore investor confidence, and successfully navigate the debt‑service conundrum. Until then, the market will likely remain highly volatile, with investors keeping a close eye on any policy tweaks, inflation data releases, and bond‑yield movements.

In sum, the 2025 week that saw the Merval plunge into its worst performance since early 2024 is a stark reminder of how quickly a country’s financial narrative can shift when macro‑policy and market sentiment collide. Investors who are keen to stay ahead of the curve will need to monitor a range of indicators—from peso movements to sovereign debt spreads—while being prepared for sudden reversals in a market that still carries a high degree of uncertainty.