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Argentina Stocks, Bonds, Peso Down On World Economic Concern
Wall Street Journal
June 22, 2009

By Taos Turner Of DOW JONES NEWSWIRES

BUENOS AIRES (Dow Jones)--Argentine stocks and bonds closed sharply lower Monday as investors seemed to voice renewed concern about the global economy as well as the upcoming June 28 congressional election.

The Merval stock index tanked 4.07% to 1,495.98.

Concern about the world economy, which may have been stoked by a World Bank report indicating the global recession may last longer than expected, pushed oil prices lower. That, in turn, helped push related Merval stocks down, dragging the whole index lower.

Steel producer Tenaris, which makes tubes used by oil companies and accounts for about 46% of the Merval's market weighting, fell 5.66% to ARS50.25. Its stocks usually rise or decline in line with oil prices.

Brazilian oil giant Petroleo Brasileiro (PBR), or Petrobras, led the declines by falling 6.35% to ARS75.20.

Petrobras has only a supplemental listing on the Merval, however, meaning its performance doesn't necessarily reflect confidence in the local market.

The widely traded dollar-denominated Boden 2012 bond fell 3.57% to ARS222.75, putting its yield at 31.71%.

The benchmark discount peso bond fell 2.09% at ARS67.80, yielding 16.90%.

"The election is coming up at the end of the month and that's the main reason for the declines," said Alejandro Barros, a trader at Banco Piano. "Banks need liquidity to make payments and that may explain some of the selling, but that can't be blamed for this major downturn. It's prudent for many entities and clients to stake their positions now and wait and see what happens after the election."

On Sunday, one-half of the Lower House seats and one-third of the Senate seats will be up for grabs.

The election will be key for Argentine President Cristina Fernandez and her administration.

Polls indicate Fernandez likely will lose her ruling party's majority in Congress, making it harder to pass legislation without first getting backing from other parties, some of which have been highly critical of the government's main economic policies.

The peso fell to ARS3.78 to the U.S. dollar, compared with ARS3.775 previously.

Volume in the exchange market totaled $445 million, according to a report by ABC Mercado de Cambios.

Banks showed heavy demand for dollars, forcing the Argentine Central Bank to inject $100 million into the market to prevent the peso from weakening too quickly, ABC said.

-By Taos Turner, Dow Jones Newswires; 54-11-4103-6728; taos.turner@dowjones.com

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