Despite recent growth, the Argentine equity market is still relatively cheap compared to other Latin American markets, says Ricardo Blüthgen, an investment manager with Origenes AFJP, the country's largest private pension fund.

The market in Argentina should see a 15% increase in the next year," he says.

"I wouldn't say that it is very cheap, but it is cheap compared with other equities in Latin America except perhaps for Brazil and investing in Brazil involves greater risk. I think Argentina has a lot more to give."

Blüthgen identifies strong GDP growth as the major factor driving the market. The economy has grown by 8% this year and Blüthgen expects a further 2-3% growth to year end with 5-7% GDP growth next year. Correspondingly, Argentine companies have seen earnings growth of 18-20% this year with 15% expected next.

This has prompted some adjustments, but Blüthgen's freedom of action in what is a growing rather than a mature market remains relatively limited. There is only limited scope to buy equity and little prospect of IPOs. "I have been trying to short my duration and trying to increase my holdings in equities but there is not much equity available in the market," he says.

Pension funds are also restricted by a regulation that says that they cannot buy unrated equity internationally - which means that they cannot buy any equity. But Blüthgen adds that with prominent international companies such as Coca Cola and Du Pont expected to list on the Argentine market, funds will soon be able to achieve international exposure.

The market has three major risks. The first would be a heavy defeat for the government by the alliance of two opposition parties in the mid-term elections. Economic problems in Brazil could also have a significant impact. "We are very Brazil-dependent," he says.

The final risk, one that is strongly emphasised by other analysts, comes from the fiscal deficit. Part of the problem is linked with tax reform.

"This year's fiscal deficit is in place and is less than has been forecast at 5% of GDP but the problem could get worse, with a lot of the economy going underground.""