Some of the world's largest hedge funds have been snapping up Argentine stocks, betting on an economic recovery in the country even though it defaulted on its debt for the second time in 13 years.
Hedge funds have built positions in Argentina's energy companies, banks and telecoms operators in a show of confidence that the clash between Buenos Aires and its holdout creditors is yet to be resolved.
Standard & Poor's placed Argentina's credit rating on "selective default" on Wednesday after it failed to make a $539m interest payment on its debt. Economy minister Axel Kicillof said "vulture funds" had rejected a renewed offer from the government and that it was "impossible" to pay them more.
Market reaction to the default was muted in the country and across wider emerging markets on Thursday. Prices fell for the Argentine bond on which interest payments were due, but failed to drop to the lows reached in 2013 during the global emerging market sell-off.
The long-running saga between Argentina and its creditors has made Argentine debt more expensive to insure against default than any other country and costs have increased more than 11 per cent in the past week.
DE Shaw, George Soros's family office, Third Point and Renaissance Technologies have all bought holdings in the US-listed shares of Argentine companies including oil companies YPF and Petrobras Argentina, former state phone company Telecom Argentina and lender Banco Francés, according to investor letters and regulatory filings.
Analysts said the complicated nature of the country's default had left some investors hopeful that a resolution could still be reached, and that exchange bondholders stand to gain if a deal is struck with holdout creditors.
Dan Loeb, manager of the $14bn US hedge fund Third Point, said in a letter to investors this month that he had bought a stake in YPF, arguing "we are in the midst of a critical inflection point for the country".
He wrote that if the government settled with its holdout creditors, "Argentina will regain access to global capital markets and solve its liquidity problem".
This year Michael Novogratz, president of US hedge fund Fortress Investments, told a conference that Argentina was one of a number of countries that were "so bad, they're good", and said a default would provide a buying opportunity for investors.
Investors in hedge funds said Argentina's settlement with Spain's Repsol, which in 2012 had its stake in YPF expropriated, prompted renewed interest from hedge funds which expect the country to try to mend relations with international investors.
"A number of funds have been playing the normalization thesis since the YPF settlement," said Alper Ince, managing director at Paamco, a $9bn investor in hedge funds.