LONDON/BUENOS AIRES, Nov 21 (Reuters) – Argentina’s black-market peso fell nearly 10% on Tuesday after pro-dollarization liberals won the country’s presidential election, raising concerns about tightening economic policy. Stocks and bonds soared on expectations.
Argentina’s local markets reopened after the holidays on Monday, providing the clearest picture yet of how investors will react to the victory of radical liberal outsider Javier Millei in the weekend’s presidential election. became.
Milay wants to cut state spending, abolish the peso currency and close the central bank.
The local S&P Marval stock index (.MERV) rose 13%, led by a more than 30% jump in state-run energy company YPF (YPFD.BA) shares, catching up with the surge in the company’s US-listed shares. The deal was made the day before Millais hinted at the possibility of privatizing the company.
But Milay’s dollar plan put pressure on the peso currency, which is held back by strict capital controls. The official exchange rate is close to 350 to the dollar, but the dollar trades at almost three times as much on the popular parallel market.
International bonds rose for a second straight day on Tuesday, gaining as much as 0.6 cents, with issue prices bid between 29 and 34 cents, according to Market Access data. Municipal bonds rose an average of 4.2%, traders said.
Milay has promised to provide economic shock therapy to a long-troubled economy, with the peso’s overvaluation seen as central to the economic crisis. There is a huge gap between the official rate and where it is traded on the street.
Morgan Stanley analysts on Monday predicted an 80% decline over the next six weeks. In the run-up to the election, Milay said he wanted to abandon the peso completely in favor of the dollar.
“Given Millay’s comments before the election, the big question is clearly what happens to the currency,” said Victor Szabo, emerging markets portfolio manager at Abdon in London.
“The black market is far removed from official rates, so some adjustment will be necessary. The question is how quickly that will happen.”
peso trading
One of the few ways locals and foreigners have been able to trade pesos over the past 48 hours has been on the virtual currency market, which trades 24 hours a day, albeit in small volumes compared to traditional foreign exchange.
Tether, a cryptocurrency pegged to the U.S. dollar, was trading at P960.3 on the day, up 1% from the pair’s high of P1,120.4 on Sunday, according to the website of crypto exchange Binance. I was away.
As for stocks, the Global It rose 1.3% after hitting its highest since the beginning of the month.
The fund’s net assets rose by $6 million to $61.9 million by Monday’s close, but there were outflows from vehicles, according to LSEG Lipper data.
Argentine banks’ U.S.-listed shares (known as “depositary receipts”) also rose. Bank Groupe Supervière rose another 3.5% after its shares and banks such as Banco Macro, Banco BBVA Argentina and Groupe Financiero Galicia closed between 17% and 24% on Monday. Shown.
Millay, who will take office on December 10, did not mention “dollarization” in her first speech, raising questions about how quickly she would aim to completely abolish the peso.
He promised major economic changes to the devastated economy, where inflation has reached 143% and is accelerating as the peso weakens.
Milley also heavily criticized Argentina’s main trading partners, China and Brazil, before the election.
Reporting by Mark Jones, additional reporting by Elizabeth Howcroft, Bhansali Mayur Kamdar and Karin Strawhecker. Editing: Bernadette Baum, Emelia Sithole-Matarise, Nick Zieminski
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