Nestor Kirchner has passed on and so Argentine asset markets rise….a fitting tribute reminiscient of the spontaneous cheer which arose from the floor of the New York Stock Exchange upon the news of the resignation of then-Govenor Elliot Spitzer….
The question now: Sell Cresud (CRESY)?
Argentine Debt, Stocks Gain as Kirchner Death May Undo Policies
By Ye Xie and Eduardo Thomson
Oct. 27 (Bloomberg) — Argentine bonds and stocks gained as the death of ex-president Nestor Kirchner bolstered speculation that opposition lawmakers will win next year’s election and reverse the country’s debt management policies.
Yields on dollar bonds due in 2033 dropped 27 basis points, or 0.27 percentage point, to 9.19 percent as the price jumped 2.35 cents to 91.5 cents on the dollar, according to JPMorgan Chase & Co. Argentine stocks trading in
New York surged the most since 2008. Local markets are closed for a holiday.
Kirchner, who carried out the harshest debt restructuring since World War II before handing power to his wife, Cristina Fernandez de Kirchner, in 2007, died of a heart attack, according to the presidential website. His move to replace key personnel at the statistics institute in 2007 fueled criticism from economists and politicians including Vice President Julio Cobos that the government is underreporting inflation.
“I don’t want to sound heartless, but it does enhance the chance of an opposition candidate winning” next year’s presidential election, said Edwin Gutierrez, who manages about $6 billion of emerging-market debt, including Argentine peso- and dollar-denominated securities, at Aberdeen Asset Management Plc in London. “He is seen as a big stumbling block to some indicative normalization.”
Argentine dollar debt yields 533 basis points more than U.S. Treasuries, the most among emerging-market countries after
Venezuela and
Ecuador in JPMorgan’s benchmark EMBI+ index. The yield gap over Treasuries declined 49 basis points today, the most in a year, to the lowest since June 2008.
‘Wide Open’
Kirchner, 60, had said in July that either he or Fernandez would run for president in next year’s election. “He was seen as a potential candidate for the October elections to succeed his wife, so now the political map is going to be wide open,” Alberto Ramos, an economist at Goldman Sachs Group Inc. in
New York, said in a phone interview.
Goldman Sachs estimates Argentine annual inflation is about 25 percent, or more than double the 11.1 percent rate the government reports. Both Fernandez, 57, and Kirchner have said the government’s data is accurate.
In 2005, Kirchner offered creditors bonds worth 30 cents on the dollar in exchange for $95 billion of defaulted debt, the harshest restructuring terms since World War II, according to Arturo Porzecanski, an international finance professor at
American University in
Washington.
Yield Gap Declines
In June, Fernandez settled with holders of $12.2 billion of bonds who had rejected the 2005 offering.
Argentina’s yield gap over Treasuries has declined from 807 basis points at the end of May as Fernandez’s restructuring with holdout creditors signaled the country is looking to regain access to the international bond market.
Creditors including billionaire investor Kenneth Dart and New York-based hedge fund Elliott Management Corp. are still suing the government in international courts for repayment of the debt.
Argentina lost its position in the benchmark emerging- market stock index in June last year and joined MSCI Inc.’s so- called frontier measure. MSCI cited restrictions on capital flows that require international investors to deposit 30 percent of investments with the central bank for a year.
“This potentially opens the door for somebody who can help us reduce capital controls and start opening the market a little bit more,” said Paul Herber, who helps manage $5 billion at Forward Management LLC in Seattle, including Argentine stocks in the Accessor Frontier Markets Fund.
MSCI
Argentina
The MSCI Argentina index of six locally-based companies gained 6.4 percent to 3,342.
65 at 12:07 p.m.
New York time. It rallied as much as 13 percent, the steepest intraday advance since Nov. 24, 2008. Grupo Financiero Galicia SA, the South American country’s biggest consumer lender, surged as much as 26 percent.
Argentina’s benchmark Merval index climbed to a record in each of the past five days.
Investors are buying Argentine American depositary receipts on prospects that “the Kirchner era” of high inflation and low corporate investment may end, said Greg Lesko, who helps manage $750 million at Deltec Asset Management in
New York.
“There is no guarantee that the next person will be any better, but change is what the market has been wanting,” Lesko said by telephone.
–With assistance from Ben Bain in
New York. Editors: James Attwood, Lester Pimentel
