Jun
2
Galicia Sets Up New Base As Argentine Stocks Soar
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Tue, Jun 03 2014 00:00:00 E
B05_NYSETOP
Argentina’s stock market is roaring in 2014.
Since Jan. 1, the Buenos Aires-based Merval index is up more than 44%, despite Monday’s 0.4% decline. It’s trouncing the performance of Brazil (see the ETF performance on the International Leaders page, today on B10).
What’s going on? The country has been taking fresh steps to regain the confidence of overseas investors and creditors since suffering the devastating effects of a $95 billion default on sovereign debt in 2001.
Last week, Argentine Economic Minister Axel Kicillof announced that the government has agreed to settle $9.7 billion worth of outstanding debt. It plans to pay back the debt over a five- to seven-year time frame at a maximum interest rate of 3.8%, according to Bloomberg News. An accord with the so-called Paris Club group of lenders will make it easier in the future for companies to obtain financing at a reasonable cost in order to invest in the South American economy.
Meanwhile, General Electric (NYSE:GE) has a bullish view on the region. GE Vice Chairman John Rice told Bloomberg that the firm sees 10% to 15% annual revenue growth in Latin America during the next few years as demands for more electricity, clean water and efficient transportation systems grow. GE also expects to get $10 billion in orders this year.
These anecdotal pieces of evidence may be one reason why investor demand is returning to companies such as banking and insurance giant Grupo Financiero Galicia (NASDAQ:GGAL), which made Monday’s Stock Spotlight screen. Galicia has rebounded back into double-digit territory and the stock’s average daily volume is north of 400,000 shares.
Galicia’s fundamentals are quite good in multiple respects. The 92 EPS Rating masks year-over-year declines in three of the past five quarters. However, the three-year earnings stability factor is excellent at 12 on a scale of 0 to 99.
Galicia’s top line has grown on average 10.5% over the past six quarters, a slowdown vs. recent years. But return on equity has topped 30% three years in a row.
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