Argentine shares are surging after a U.S. court ruling put the country close to default as local investors seek to swap the securities for stocks traded in New York, according to Alejandro Bianchi, head of investment at Buenos Aires brokerage Invertironline.com.
The benchmark Merval stock index rose 4.6 percent at 4 p.m. in Buenos Aires, the most in six days. The move caused the implied peso rate that results from the difference in local and New York share prices, known as the blue-chip swap, to weaken 5.5 percent to 10.81 per dollar.
Investors are speculating that the country’s international reserves will tumble after the U.S. Supreme Court decided yesterday it won’t review earlier rulings favoring holdout creditors. President Cristina Fernandez de Kirchner banned most foreign-currency purchases in July 2012, so investors access dollars by buying local shares that can be bundled into American depositary receipts.
“The dollar in the parallel market has to rise because, put simply, the ruling means fewer dollars for Argentina,” Bianchi said in a telephone interview from Buenos Aires. “Investors are already anticipating this and it gets priced into stocks.”
Argentina’s central bank reserves have fallen 25 percent in the past year to $28.8 billion. Fernandez said yesterday total holdout claims could total $15 billion.
The peso in the black market weakened 4 percent to 12.35 per dollar, according to newspaper Ambito Financiero. The official rate, controlled by the central bank, was little changed at 8.13 per dollar.
Investors also may be seeking to make a quick gain by buying the securities after the Merval’s 10 percent drop yesterday, Bianchi said.
Argentine state oil producer YPF SA’s local shares rose 7.4 percent, the index’s biggest gain, while the company’s American depositary receipts were up 4.5 percent.
Other ADRs fell, with Empresa Distribuidora y Comercializadora Norte SA’s losing 2 percent, as international investors reduced their Argentine exposure, Bianchi said.