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Economy
In reply to the discussion: STOCK MARKET WATCH -- Friday, 23 May 2014 [View all]xchrom
(108,903 posts)24. Hedge Funds Clash With Wall Street Bankers in Argentina
http://www.bloomberg.com/news/2014-05-21/hedge-funds-clash-with-wall-street-bankers-in-argentina.html
The surge in Argentinas securities tied to economic growth is rekindling a decade-old disagreement between investors and Wall Street.
The warrants, which provide payouts when growth exceeds targets, have jumped 29 percent from a nine-month low in March on speculation a data revision that boosted the size of the economy will lead to bigger payments in the future.
While investors are piling into the securities, banks from Citigroup Inc. to Credit Suisse Group AG say the advance is excessive as the terms of the warrants have enough wiggle room for Argentina to avoid making the larger disbursements. Issued in debt restructurings from Argentinas $95 billion default in 2001, the warrants plunged in March when the government said changes in the way it calculates growth meant the economy didnt expand enough to pay holders this year.
Theres been this extreme valuation schizophrenia among analysts, Shahriar Shahida, co-founder of New York-based hedge fund Constellation Management LLC, which owns the warrants, said by telephone. We have found the Argentine valuation story to be one of the most compelling out there, and the warrants are the best way to play that.
The surge in Argentinas securities tied to economic growth is rekindling a decade-old disagreement between investors and Wall Street.
The warrants, which provide payouts when growth exceeds targets, have jumped 29 percent from a nine-month low in March on speculation a data revision that boosted the size of the economy will lead to bigger payments in the future.
While investors are piling into the securities, banks from Citigroup Inc. to Credit Suisse Group AG say the advance is excessive as the terms of the warrants have enough wiggle room for Argentina to avoid making the larger disbursements. Issued in debt restructurings from Argentinas $95 billion default in 2001, the warrants plunged in March when the government said changes in the way it calculates growth meant the economy didnt expand enough to pay holders this year.
Theres been this extreme valuation schizophrenia among analysts, Shahriar Shahida, co-founder of New York-based hedge fund Constellation Management LLC, which owns the warrants, said by telephone. We have found the Argentine valuation story to be one of the most compelling out there, and the warrants are the best way to play that.
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