Is the Argentina ETF Ready to Rally?

With the market awash in quantitative easing hope turned ebullience, it is not surprising that the performances of some less-than-popular international ETFs are going unnoticed. Such is life for the Global X FTSE Argentina 20 ETF (NYSE:ARGT), the lone ETF tracking the controversial frontier market.

Unknown to many investors is the fact that the Global X FTSE Argentina 20 ETF is up four percent in the past month. More impressive is the fact that ARGT has jumped 5.4 percent in the past five trading days and is trading above $9 for the first time since May.

Part of the impetus behind ARGT's bullishness this week may come as a surprise to some investors. That reason being political unrest in what is now South America's third-largest economy behind Brazil and Colombia.

Argentines are not happy with President Cristina Fernandez and her way of doing business. The Fernandez Administration drew heavy scrutiny earlier this year for Argentina's nationalization of energy firm YPF S.A. (NYSE:YPF), a move that caused yields on Argentine bonds and the credit default swaps insuring those bonds to blow out.

Thursday night, thousands of Argentines took the streets of Buenos Aires, the nation's capital, in what the Associated Press called the largest protests yet against the Fernandez government. Fernandez has seen her popularity erode amid corruption scandals, violent crime and her heavy-handed approach to economic affairs, the AP reported. It is not impossible for country-specific ETFs, even those tracking higher risk frontier markets, to rally amid political volatility. The performance of the Market Vectors Egypt ETF (NYSE: EGPT) earlier this week proves as much.

However, the comparison of ARGT and EGPT is of the apples-to-oranges variety. EGPT is one of the best-performing country-specific ETFs year-to-date. ARGT is one of the worst. Egypt's recent political volatility turned violent and is aimed at the West. Argentine protesters are not decrying Western policies, but rather the policies set forth by their own government.

The Fernandez Administration is a major reason why foreign investors have remained apprehensive about Argentina despite the country's oil and natural gas reserves. ARGT has been adversely impacted by this scenario. The ETF debuted in March 2011 and has never really flourished in terms of gathering assets. Right before the YPF nationalization, the ETF had about $3.5 million in assets under management. At the close of U.S. markets on September 13, that number was $3.1 million.

On the other hand, there is at least one sign traders are encouraged by the fact Argentines are now standing up to Fernandez. ARGT is up 4.4 percent today on volume that is more than double the daily average.

Still, there are risks. Argentina's rate of inflation is soaring, punishing the country's peso in the process. The weak peso has chased Argentines into U.S. dollars, but the country has now made such transactions illegal, the AP reported. Additionally, Fernandez will not be up for reelection until 2015 and there is a chance she could act to dismiss term limit laws to stay in power even longer.

That could mean if Argentines truly want political change, it could take an old school Latin American coup to make that change a reality.

Obviously, there are risks with ARGT and the broader Argentine economy. However, traders that are willing to treat ARGT as a trade, not an investment, could find that bad news for Fernandez is good news for them.

For more on ETFs with significant political risk, click here.