20171206-法国巴黎银行-Argentina_monetary_debt_monitor__December_2017_11页_372kb

Summary of Latin America Strategy Document: Argentina Monetary/Debt Monitor - December 2017

Core Content

This document provides a comprehensive overview of Argentina's monetary and debt dynamics as of December 2017, with a focus on the financial sector's behavior, public debt composition, international reserves, FX market activity, and the performance of the mutual funds industry. The report is prepared by BNP Paribas and outlines key trends and insights relevant to investors and market participants.

Main Points

Public Debt Overview

• Total Debt Held by Central Administration (Q2 2017):
  The total debt reached ARS 5.1trn (USD 307.3bn), with hard currency bonds comprising 67.6% of the debt stock.
• USD-Denominated Debt:
  USD obligations made up 60% of the central administration's debt, while ARS debt (both nominal and CER-linked) accounted for 32.4%.
• Non-Resident Participation:
  Non-residents held 37.4% of the public debt, or USD 109.0bn, indicating increased foreign interest in Argentina's debt.
• Average Cost of Debt:
  The average cost of debt increased to 6.2% in Q2 2017. When considering sterilization costs and inflation, the effective cost for ARS debt rose to 22%.

Monetary and Credit Trends

• Deposits Growth:
  In November 2017, private ARS-denominated deposits expanded by 3.4% m/m, outpacing USD deposits.
  • ARS deposits: 1,679,629mn (ARS) or 24.0% y/y increase.
  • USD deposits: 30,581mn (USD) or 22.2% y/y increase.
• Credit Expansion:
  Private credit in local currency increased by 4.9% m/m, with a 50.1% y/y growth, outperforming deposit growth.
  • ARS-denominated credit: 1,266,128mn (ARS) or 45.6% y/y increase.
  • USD-denominated credit: 14,330mn (ARS) or 59.2% y/y increase.
• Lebac Performance:
  The Lebac curve reflected rising yields, with the 35-day Lebac rate at 28.75% in November 2017.
  • Outstanding Lebac stock: USD 67.4bn, with 38.5% of the total maturing in December 2017.
• Net International Reserves:
  International reserves rose to USD 54.7bn, while USD reserve requirements increased only slightly, leading to net reserves of USD 40.4bn.

FX and Capital Flows

• Foreign Asset Purchases:
  The non-financial private sector purchased USD 1.95bn in October 2017, contributing to a 12-month cumulative USD purchase of USD 28.3bn, the highest in the series.
• Capital Flight:
  Capital flight remained above average at USD -1.5bn, but was offset by portfolio inflows due to high returns on ARS instruments.
• FX Market Dynamics:
  The strong appetite for USD remains despite higher ARS rates and lower USD deposit expansion, indicating persistent demand for external assets.

Mutual Funds Industry

• Assets Under Management (AUM):
  The mutual funds industry's AUM reached ARS 565.6bn (USD 32.0bn) in October 2017, up by 75% from the start of the year.
• Fund Composition:
  • Fixed income funds: Accounted for 72% of the industry.
  • Money market funds: Held 9% of the allocation.
• Performance:
  The mutual fund industry reported a 12-month cumulative performance of 29%, with fixed income funds achieving 32%.
• BCRA Holdings:
  Mutual funds held ARS 282.5bn in BCRA paper, or 24.7% of the central bank's securities.

Key Information

• Interest Rates:
  • The 35-day Lebac rate increased to 28.75% in November 2017.
  • The 30-44 day time deposit rate was 22.16%, up from 20.39% in October 2017.
• Maturity Profile:
  Debt maturities were concentrated in December 2017 and March 2018, with an even distribution across quarters.
• Market Dynamics:
  Despite higher interest rates and lower USD deposit growth, USD purchases by retail investors remained strong, suggesting continued demand for external assets.
• Inflation Adjusted Cost of Debt:
  The effective cost of ARS debt, adjusted for inflation and real yields, reached 22%, highlighting the high burden on the central administration.

Important Contacts

Legal Disclaimer

• This document is a marketing communication and not investment research. It is intended for Relevant Persons and is subject to MiFID and UK FCA rules.
• No liability is accepted for any reliance on the document or its content.
• BNP Paribas may have conflicts of interest and may engage in transactions inconsistent with the views expressed in the document.
• The information is based on public sources and may not be independently verified.
• Performance data is not indicative of future results and may include back-testing or simulations.
• Options and ETFs discussed are complex instruments with high risk and potential conflicts of interest.
• Restricted securities may not be eligible for sale in all jurisdictions or to certain investors.
• The document is confidential and may not be copied or distributed without prior consent.