Get 40% Off
🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Argentina's bonds slip, stocks plunge after presidential vote

Published 10/23/2023, 07:58 AM
Updated 10/23/2023, 11:10 AM
© Reuters.
USD/ARS
-
CRES
-
BBAR
-

By Jorgelina do Rosario

LONDON (Reuters) -Argentina's international sovereign bonds fell and the country's stocks tumbled on Monday after Economy Minister Sergio Massa emerged as the surprise frontrunner in Sunday's general election as markets balked at the uncertain prospects ahead.

The country's 2035 overseas note suffered the sharpest decline, losing 2.3 cents and was being bid at 23.7 cents, while other notes were down between 1.65-2.16 cents on the dollar at 1450 GMT, according to MarketAxess data.

Argentine stocks fared little better, with U.S.-listed shares of oil company YPF plunging 9% in their worst day in over a year, while Cresud shares tumbled 6.2%. Shares of Banco BBVA Argentina (NYSE:BBAR), Grupo Financiero Galicia and Grupo Supervielle slipped between 3.5-5.6%.

Despite the latest drop, domestic stocks listed in Argentine pesos are still up more than 260% this year, supported by cheap valuations in anticipation of a change in political trajectory. Local investors have also been piling into equity markets to hedge against inflation which has soared into triple digits for the first time since 1991.

The ruling Peronist coalition smashed expectations to lead the country's general election on Sunday, setting the stage for a polarized run-off vote on Nov. 19 between Massa and far-right radical Javier Milei.

"Massa and Milei both herald greater uncertainty," said Graham Stock, London-based senior EM sovereign strategist at RBC BlueBay Asset Management.

"In Massa's case, the key question is which strand of the broad Peronist coalition would dominate in his government. In Milei's case, the key question is how much of his radical economic and social agenda would he be able to implement," Stock added.

The surprising strength of the Peronists, despite the country's worst economic crisis in two decades with a recession looming after a painful drought, sets up a second round between two polar opposite economic models for the embattled country.

While investors had expected Milei to reach a runoff, Massa's strong performance is negative for asset valuations as it means that market-friendly candidate Patricia Bullrich is out of the race, said Bruno Gennari, emerging markets strategist and Sales at KNG Securities LLP.

"We will follow closely what the different leaders of Together for Change have to say about the winning candidates, as some members of the opposition coalition might not be so happy with embracing Milei," Gennari said.

Massa had 36.6% of the vote, ahead of Milei on just over 30%, while conservative Bullrich was behind on 23.8%. "To win, Massa and Milei need to win over Bullrich voters," added Kimberley Sperrfechter, emerging markets economist at Capital Economics.

Argentina's peso opened steady at 350.10 per dollar, traders told Reuters.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.