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Argentina stocks crash 17.3%, country close to defaulting on debt
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Posted by ian 1 year 29 days ago (bloomberg.com). Views: 87
Tags: stocks credit crisis |
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Oct. 22 (Bloomberg) -- Argentina's stocks headed for their biggest drop since 1990 and dollar bond yields topped 30 percent as a planned takeover of pension funds heightened concern the government is headed for its second default this decade.
The benchmark Merval stock index tumbled 17.3 percent on speculation President Cristina Fernandez de Kirchner plans to use the funds' $29 billion to meet financing needs that have swelled as prices on the country's commodity exports tumbled. Argentina hasn't had access to international debt markets since its 2001 default and demand for its local bonds has dried up on concern the government is underreporting inflation.
``They're taking people's pensions away and using that to fund the government,'' said David Bessey, who manages more than $8 billion of emerging-market debt in Newark, New Jersey, for Prudential Financial Inc. ``It's yet another unorthodox approach to trying to deal with the country's economic situation rather than taking the bitter medicine.''
Yields on Argentina's 8.28 percent bonds due in 2033 surged 4.15 percentage points to 28.84 percent at 2:37 p.m. in New York, after earlier topping 30 percent, according to JPMorgan Chase & Co. The bonds yielded 12.16 percent a month ago.
The price on the bonds, which were issued as part of a 2005 debt restructuring, dropped 5.11 cents to 24 cents on the dollar after falling 7.8 cents yesterday. The benchmark Merval stock index sank to a four-year low, extending its decline this week to 29 percent.
Region-Wide Declines
The rout in Argentine markets sparked declines across developing nations. Neighboring Brazil's currency, the real, sank 6 percent while Turkey's lira dropped 6.6 percent. The extra yield investors demand to own developing-nation debt swelled 75 basis points, or 0.75 percentage point, to 7.64 percentage points, the most since December 2002, according to JPMorgan's EMBI+ index.
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