The country’s financial markets have been in bad health since Argentina suffered a severe economic crisis between 2001 and 2002.
At the end of October this year, the total market capitalization of the Buenos Aires stock exchange was $62 billion compared with $1.4 trillion for the São Paulo exchange and $426 billion for the Mexico City exchange, according to the World Federation of Exchanges. Even Peru’s Lima exchange has a market cap of $69.9 billion.
However, it is understood that several big Argentine enterprises plan to undertake IPOs next year, including retail and real estate group Pegasus Capital, banking group Banco Supervielle, pharmaceuticals company Sidus, and airports operator Aeropuertos Argentina 2000.
Pablo de Estrada, director of Mercado Abierto Electrónico, Argentina’s main market for securities certificates and FX, says: "More than 20 companies are looking at listing in Buenos Aires. They will stagger the IPOs so that they do not all come to the market at the same time. Some of these companies may want to list on foreign exchanges as well but could run into problems because of the sub-prime turmoil. However, Argentina has a very limited mortgage market and is largely insulated from the sub-prime crisis. At the moment, it should not be a problem for them to carry out IPOs here."
Only two IPOs – by banking group Banco Patagonia and media group Grupo Clarín – have taken place in Argentina this year, bringing the total number of stocks listed on the Buenos Aires exchange to 108. Group Clarín also listed in London in October.
Meanwhile, the number of companies registered on the São Paulo exchange jumped by 51 to a total of 431 at the end of October, from 380 on January 1. The total raised by share issuance, including IPOs and secondary offerings, in Buenos Aires this year until October was $959 million, compared with $37.6 billion in São Paulo.
Share turnover volatility on the Buenos Aires exchange in October was 8.8%, compared with 55.1% on the São Paulo exchange.
Argentina’s economy has grown by an average 8.8% annually over the past five years, and several companies, especially in the booming agribusiness and property sectors, are looking at IPOs. Some large media groups, including Grupo La Nación, owner of one of the country’s most influential newspapers, could also want to follow Clarín’s lead.
A number of Argentine companies believe there is sufficient liquidity to support many more IPOs. Alberto Saravia, chief executive of Argentine investment advisers Saravia Financial Management, says: "Buenos Aires needs many more new, active stocks for it to be a meaningful stock market. The government recently changed the rules for private pension funds, forcing them to bring back to the country funds invested in Brazilian stocks. It could be that some of this financing goes towards new corporate issuance in Argentina."