Argentina has taken center stage of global politics in recent weeks for all the wrong reasons. The country’s expropriation of the oil company YPF (YPF) from its Spanish parent Repsol (REPYY) has been met with widespread condemnation and retaliatory actions by Spain. In addition, already nervous foreign investors are further pulling their capital out of Argentina. As a result of this dramatic action by President Cristina Kirchner, Argentine ADRs have fallen heavily in the past few days with one commentator calling investors to sell all Argentine ADRs immediately.

Of the 17 Argentine ADRs trading on the NYSE and NASDAQ most are down YTD. YPF is down about 58% YTD.

It is too early to confirm that Argentina is on the way to become the next Venezuela or even Cuba with one nationalization. Investors may want to avoid knee jerk reaction and try to monitor the situation closely.

Other than the energy sector banking is a key sector to keep an eye on. The three Argentine banking institutions listed on the US organized exchanges are Banco Macro (BMA), BBVA Banco Frances (BFR) and Grupo Financiero Galicia (GGAL). All the three ADR are off by 50% or more in the last five years.

Banco Macro used to solid dividends until recently. When the bank announced the fourth quarter, 2011 earnings it mentioned the suspension of dividend payments due to a recent regulatory change.  The YPF nationalization and the dividend suspension news has pushed the ADR price to under $16.00 on Friday.In late 2010 Banco Macro ADR traded above $54.00 a share.

From the 4Q, 2011 earnings report:

Based on BCRA Communication “A” 5273, all financial entities that wish to distribute dividends, must have an excess capital of 75% (before it was 30%) after the deduction of proposed cash dividends over the required capital. Based on the above, Banco Macro will not be able to distribute dividends.

Disclosure: Long BMA