BUENOS AIRES — María Rosales, 39, is one of millions of less affluent Argentines locked out of the traditional financial sector. The former cruise ship worker lost her job in 2015 and has relied on her family for financial support to stay afloat since.

Now her small pot of savings is in demand from a new group of lenders: digital banks on the hunt to mop up funds from the country’s huge shadow economy.

The nascent shift could shake up how people save their money in a market noticeable for a heavy reliance on cash, a paucity of bank savings and little trust in traditional banks or the volatile local peso, which lost half its value against the dollar last year.

Argentine bank deposits as a portion of gross domestic product are just 18.8%, according to a recent Organization for Economic Co-operation and Development (OECD) report, which said the country had a “scarcity of domestic savings.”

That compares to nearly 60% in neighboring Brazil. In Mexico, which has also been promoting alternatives to traditional banking, it is almost 30%.

“I do not know if there is a sector in Argentina as behind as the financial one,” Stefano Angeli, chief executive of Rebanking, a digital bank which will start operations in May, told Reuters.

“We believe digital banking will be the way to develop this business in the long term.”

As well as start-ups, international lenders are looking at getting into Argentina’s digital banking market. Banco Santander has said its digital bank will launch in the country soon, while Brazil’s Itau Unibanco said last year it was looking at opening online-only accounts in Argentina.

When Rosales became unemployed her former bank started to charge her to keep her old account open and she did not have the paperwork such as payslips and utility bills needed to open a new one.

Instead, she turned to local digital lender Wilobank, which touts easy access and gives her some interest on her savings — important with inflation running at 50% annually.

“You become a client in minutes without going anywhere,” Wilobank says on its website.

Rival Brubank says, “You will need a few minutes. Have your national identity document at hand and that’s it.”

Lucas Llach, a former vice president at Argentina’s central bank who focused on financial inclusion, said the shift was logical, with so many people unable to access brick-and-mortar banks.

“There is a population that does not feel welcome (in traditional banks),” he told Reuters, adding the advent of digital lenders could help the government by bringing more funds out of the unregulated shadow sector.

“Technology lowers the costs of banking, and with these new technologies — where everything is digital — it becomes profitable to have lower-income clients.”

‘IT’S A TEST’
Firms like online auction company MercadoLibre Inc., recently invested in by PayPal, and George Soros-backed Uala are also pushing technology such as digital wallets and payment apps.

“There is a market because there are many people who are not banked, who do not want the costs of traditional banks,” Wilobank President Guillermo Francos told Reuters.

Wilobank said it has attracted 25,000 clients in its first six months of operation, and expects to hit 100,000 by the end of the year and 300,000 by late 2020.

The government has sought to help the sector, cutting red tape and making it faster to set up new banks.

A central bank official, who spoke on condition of anonymity, said this could help force established lenders to become more competitive, something the bank has been pushing for to bolster savings accounts and shore up the local peso.

Digital banking heads told Reuters they were looking to reinvest deposits into the same kinds of instruments traditional banks use, including high-interest government debt that has been a boon for lenders.

Luring hard-hit Argentines back to the financial sector will not be easy, however. Many lost their savings during a major financial crisis in 2002, since when a sharp devaluation of the peso and a period of currency controls battered trust in banks.

Nicolás Cánepa, a 39-year-old scientific researcher, is wary but curious. He opened a digital account earlier this year and got a credit and debit card within a week.

“I kept the accounts I have in traditional banks because I get some benefits,” he said in a telephone interview, adding however he got a better interest rate on the new digital account.

“I did not put all my salary in. For now it’s a test.” — Reuters

TECHNOLOGY stocks have reclaimed record highs, making them one of the first groups to put last year’s carnage behind them. But everywhere else you look in the industry, bad news is overwhelming the good.

Profits are shrinking at an alarming pace, valuations are reflating and politicians want to break the companies up. Semiconductor orders have slumped, and spending on infrastructure to support the cloud is off. And yet the addiction won’t break. Shares are up more than 30% since Christmas.

It’s a familiar sight to anyone who’s been watching the broader US stock market, which just posted its best quarter in 10 years even as earnings estimates slid. However grim things look, too much money has been lost by sitting out. Mike Wilson, the chief US equity strategist at Morgan Stanley, says groupthink is taking over, a force that while capable of provoking powerful rallies, usually precedes a cycle’s peak.

“I can’t remember a time in my career when institutional investors have been so preoccupied with what everyone else is doing,” said Wilson, who advised investors to avoid tech stocks. “When investors are more focused on what everyone else is doing, rather than what the fundamentals are doing, it’s probably the end of a trend.”

If this is the end, it’s been a tough one to miss. The Nasdaq 100 just rose for the 14^th time in 15 weeks and is about one big day away from its August record. Fourteen companies, among them chip standard-bearer Advanced Micro Devices Inc. and Lam Research Corp., are up more than 50% from their Christmas lows, and only seven stocks in the gauge are down over the stretch.

All this as software and electronics makers prepare to report an 8.7% drop in first-quarter profit, analyst estimates compiled by Bloomberg show. Should that forecast come true, that would mark the worst income decline since 2009.

But investors aren’t fazed, rushing back to an industry that was the market’s favorite as recently as last summer. At 4.4 times sales, tech stocks trade at a multiple that is twice as high as the rest of the market. That’s close to the highest premium since 2000.

Bulls can be forgiven for their passion as tech firms have proved a reliable source of superior growth over the past four years, a stretch when recession fears kept haunting the market. For 15 straight quarters through last June, tech profits outpaced the S&P 500, with the growth gap averaging 6.3 percentage points.

“Everybody is trying to find growth at all costs and there’s not a plethora of options,” said Mark Lehmann, president of JMP Securities. “People are willing to pay more.”

To be sure, the industry has managed to innovate itself out of growth slumps in the past. Who knows what they’ll make off everything from self-driving cars and artificial intelligence in coming years.

But right now, tech has a growth problem. Products such as smartphones have entered a maturing phase and parts makers like semiconductor companies have seen weak demand from a range of end markets including data centers.

Analysts don’t see any quick rebound, projecting essentially flat sales through the third quarter of 2019. Partly reflecting the bleak outlook, their price targets for tech stocks pointed to only a 2% gain over the next 12 to 18 months. That rate of expected returns trails all other S&P 500 industries except for utilities.

To Edwin Davison, a senior equity analyst with DuPont Capital, the resurgence in tech shares, particularly those sensitive to economic swings like chipmakers, reflects an improved macro backdrop — the Federal Reserve has turned more dovish, the Sino-US trade talks are progressing and China has introduced another round of economic stimulus.

Once companies start rolling out their financial reports, investors will focus on whether all the positive developments translate into gains for individual businesses, he said.

“People are starting to bake in some of these things: trade, the Fed, China stimulus,” Davison said. “Things have stabilized. I think there are still questions about exactly what the second half looks like,” he said, referring to semiconductors.

The persistent love for tech stocks is reminiscent of the 1990s Internet frenzy to Leuthold Group. Granted, the excitement today pales in comparison and is motivated by nothing other than the fact that the industry is a default choice when growth is scarce. Still, the danger of crowding is no less pronounced, said Doug Ramsey, the firm’s chief investment officer.

“In the late 1990s, it was the carrot. In this cycle, it’s been the stick,” Ramsey said. “Different paths, but each has led to similarly precarious portfolio bets.” — Bloomberg