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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: gmccon who wrote (5617)	8/17/1998 2:09:00 PM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

I know this isn't Russia Forum, but their actions today have severe repercussions for the global economy, specifically South America. Notice how the Russian Stock Market didn't collapse today, because the devaluation was already "priced in". It did end slightly lower I believe, but oil exporters such as Lukoil rose amid the news, as the devaluation benefits them in someways. Though offsetting any favorable currency translation are higher interest payments they will make on Company dollar-denominated debt. Whether traders will price this in is anyone's guess. Anyway, South America will suffer greatly. How? Take Argentina's YPF Socieded Anonima for example, a mammoth O&G concern. They have been ailing from low oil prices and unfavorable currency translation, as the Argentine Peso is pegged to the US$. I believe that today's move by Russia will force Argentina to let the peso float. Although a release from the peg has been much anticipated, no clear catalyst has emerged to force it until now. Speculation was that Brazil might devalue which would force Argentina to release the peg, but now I believe Russia has hit them even harder. After Argentina devalues, Brazil & Chile will be pressured, and you can take it from there. Argentina relies heavily on revenues from natural resources, which have already been curbed because of declining commodity prices. Russia, ripe with natural resources, can now offer lower average selling prices than Argentina and other major resource exporters, like Canada. Canada is not in the same boat as Argentina because the C$ has depreciated significantly already. So the peg in Argentina has got to go. South American banks seem set for a great slide here, though it already started 7/31.