Argentina’s MERVAL Index Gains Over 51,000 Points: Milei’s Electoral Victory Drives Rally

The S&P Merval Index closed at 2,369,505.20 points on Monday, May 19, 2025, marking a significant gain of 2.21% (51,145.25 points) in a single trading session.

This positive performance comes amid a backdrop of political developments and renewed investor confidence following President Javier Milei’s party’s strong showing in local elections.

The Argentine benchmark index has shown remarkable resilience today, continuing its recovery after a challenging start to 2025. Despite today’s gains, the Merval remains down 6.32% year-to-date.

This follows a substantial decline from its all-time high of 2,867,774.50 reached in January 2025. Today’s rally represents a 15.83% increase over the past month, signaling a potential shift in market sentiment.

Trading volume was robust, with particular activity in energy and financial sectors. The market’s performance today stands in stark contrast to its recent trajectory, as the index had tumbled 16.55% since the beginning of 2025 following a spectacular 172% gain in 2024.

Key Market Drivers

Political Developments

The primary catalyst for today’s market surge was the weekend electoral victory of President Milei’s libertarian party in Buenos Aires. His party garnered the highest number of votes in the capital’s legislative elections, exceeding pollsters’ predictions.

While this translates to only a few additional seats in the city’s legislature, analysts view it as a symbolic affirmation of Milei’s economic reform agenda.

“The majority of the backing was directly tied to Milei,” remarked Shila Vilker, a political consultant based in Buenos Aires with Trespuntozero, describing the outcome as a “decisive win” for Milei’s bold approach to austerity and deregulation. “It’s an affirmation of the direction they are pursuing.”

Investor Confidence

Graham Stock, an emerging markets strategist at RBC Global Asset Management, noted: “Milei’s list was not anticipated to secure first place, and this carries two significant implications.”

He explained that this outcome provides Milei with leverage over his more centrist conservative allies and “implies they may perform better than expected in the midterms in October.”

Sector Performance

Top Gainers

1. Ternium Argentina (TXAR): Surged 14.6%, adding AR$374.9 billion to its market cap despite being down 32.4% year-over-year. The materials sector company benefited from renewed confidence in industrial exporters.

2. YPF Sociedad Anónima (YPFD): Gained 2.2%, adding AR$363.8 billion in market value. The state oil company received a significant boost after Citigroup upgraded its outlook from Neutral to Buy on May 19. YPF is up 55.3% over the past year.

3. Transportadora de Gas del Sur (TGSU2): Rose 7.0%, adding AR$353.8 billion to its market cap. The energy infrastructure company has gained 62.2% over the past year.

4. Aluar Aluminio Argentino (ALUA): Jumped 17.9%, adding AR$310.8 billion in market value, despite being down 24.6% year-over-year.

5. Telecom Argentina (TECO2): Increased 4.1%, adding AR$215.4 billion to its market cap. The telecommunications giant has gained 24.0% over the past year. In a separate trading note, Telecom Argentina’s ADR (TEO) surged 7.26% on the Nasdaq, reaching an intraday high of $11.78 before settling at $11.75.

Notable Losers

1. Mirgor (MIRG): Declined 2.8%, despite being up 50.1% year-over-year.

Fundamental Analysis

Argentina’s stock market currently trades at a P/E ratio of 13.69 as of May 19, 2025, which is considered “fair” when compared to its 5-year average P/E interval of [10.52, 13.70].

The market’s valuation metrics have shown significant improvement since 2023, with the absolute PE ratio decreasing from higher levels earlier in the year.

The Argentinian market capitalization stands at AR$91.9 trillion as of May 20, 2025, with total revenue of AR$71.4 trillion and earnings of AR$6.4 trillion. These figures represent modest growth from the previous month but remain below January 2025 levels.

Technical Analysis

From a technical perspective, the Argentina Stock Market is showing positive momentum:

• Long-term trend (Price vs. SMA200): +21.08% as of May 19, indicating strong bullish momentum
• Short-term trend (Price vs. SMA50): +12.53% as of May 19, confirming the positive trajectory

The ARGT ETF, which tracks the Argentina Stock Market, is demonstrating robust technical indicators, suggesting continued upward momentum in the near term.

Global Market Context

Argentina’s market gains occurred against a mixed backdrop in global markets:

• United States: The Dow Jones Industrial Average rose 0.32% to close at 42,792.07, while the S&P 500 gained a modest 0.09% to end at 5,963.60. The NASDAQ Composite finished essentially flat with a 0.02% increase to 19,215.46.
• Europe: European markets showed strength, with Germany’s DAX rising 0.7% to 23,934.98 and the FTSE 100 gaining 0.17% to 8,699.31.
• Asia: Asian markets were mixed, with Japan’s Nikkei 225 declining slightly by 0.05% to 37,480.39 and Hong Kong’s Hang Seng Index also down 0.05% at 23,332.72.

The global context featured rising Treasury yields and a weakening dollar amid fiscal concerns following recent U.S. policy developments. The VIX volatility index jumped 5.22% to 18.14, indicating increased market uncertainty.

ETF Flows and Foreign Investment

The Global X MSCI Argentina ETF (ARGT) has seen substantial inflows in recent months, though specific data for May 19 was not available.

For context, this ETF saw record inflows of US$144 million for a week in November 2024, with assets jumping roughly seven-fold from US$104 million when Milei took office to some US$750 million.

Malcolm Dorson, senior portfolio manager at Global X Management, previously commented on Argentina’s appeal: “Milei hasn’t just talked the talk, but is actually walking the walk. He has trade balances, he has built a fiscal surplus, inflation is ticking down, and economic activity is picking up.”

Economic Outlook

The International Monetary Fund (IMF) has maintained its 5.5% growth projection for Argentina in 2025, despite global trade uncertainty.

This optimistic forecast is supported by “positive data” seen in the early months of the year, with the IMF noting that tighter fiscal policy had been offset by a rise in market confidence.

Petya Koeva Brooks, a senior economist at the IMF, explained: “We still have that forecast basically because of the positive numbers we saw. Despite the fiscal adjustment, there was an increase in confidence and that allows us to sustain the projection.”

Argentina’s economy grew 5.7% in February 2025, aligning with the IMF’s projected 5.5% growth for the year. However, challenges remain, including peso volatility following the lifting of capital controls in April and the impact of U.S. tariffs on exports.

Looking Ahead

Market analysts expect the Argentina Stock Market (MERVAL) to trade at approximately 2,235,594.55 points by the end of the current quarter, with a longer-term projection of 2,004,685.89 in 12 months’ time.

The upcoming midterm elections in October 2025, which will renew 127 of the 257 seats in the Chamber of Deputies and 24 of the 72 seats in the Senate, represent a critical juncture for Milei’s reform agenda and market sentiment.

As Argentina continues its economic transformation under Milei’s leadership, investors will be closely monitoring inflation trends, currency stability, and the government’s ability to maintain fiscal discipline while navigating global trade tensions and domestic political challenges.

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