Morgan Stanley is betting on Argentine assets, anticipating a victory by the government.

Morgan Stanley reported that it keeps a long position in the Argentine market, confident that the results of the midterm elections  will favor the administration led by Javier Milei. The expectation of political strengthening for the government is interpreted as a positive signal for moving forward with the economic reform program.

The bank identified the elections as "the short-term obstacle for the economy, reforms, and markets", highlighting the vote in Buenos Aires Province (PBA) on September 7 and the national legislative elections on October 26. Analysts note that polls currently show a tight race in PBA, although their base case anticipates a good result for the administration.

Morgan Stanley expects Argentine financial markets to rise after the elections. According to research published on Monday, Argentine USD bonds could trade with a yield below 10% by year-end, which represents approximately 11 points of upside potential from current levels. This yield compression would reopen market access for Argentina.

For equities, which trade at 7.9 times the forward consensus earnings per share, the bank sees "attractive" upside potential. The firm specifically recommends maintaining positions in Vista, Banco Galicia, and Loma Negra.

Confidence in the economic direction

The analysis emphasizes that the appeal of Argentine assets will depend on Milei's ability to capitalize electorally on social support and turn it into legislative capacity. Despite the positive outlook, Morgan Stanley advises investors to maintain "moderate long positions in both asset classes" due to downside risks, warning that "a scenario of reform reversal would leave external financing needs too high."

This way, the bank's bet reflects the view that a good electoral performance by the administration could consolidate market confidence, reinforcing the rally in bonds and equities in Argentina.