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Moody's: New multi-currency rule for Argentine mutual funds a credit positive

The new measures allowing Argentine mutual funds to manage investors' purchases and redemptions in both foreign and local currencies, as opposed to the previous single-currency limit, are credit positive for asset managers, Moody's said.

In a sector report, the rating agency said the new rule will enable foreign investors to invest directly in Argentine mutual funds even if they do not access the foreign-exchange market. It is positive for the creditworthiness of the industry as it will add up to the fast growth trend in assets under management, or AUM, in the past years.

Foreign and local investors with onshore and offshore accounts will be able to invest in funds that otherwise could only be purchased in Argentine pesos. "Previously, retail investors had to buy pesos to invest and buy foreign currency after selling shares, all in the retail market. Now, fund managers can do this for investors in the wholesale currency market," Moody's said.

The rating agency expects the new measures to spur an additional 50% rise in the total AUM over the next six months, compared to a 94% compound annual growth rate in the past 12 months.

"This will help the Argentinean market gain more depth and volume, potentially making transactions less expensive and improving liquidity for local assets," Moody's noted, adding the new measures are important due to the high dollarization in the Argentine market.