Argentine Stocks Fall Most in Americas on Mutual Fund Regulation

  • Merval pared gains after dropping as much as 9 percent earlier
  • Securities regulator changes valuation standards for funds

Argentina’s benchmark Merval stock index posted the biggest decline in the Americas as traders that use some of the securities to obtain foreign currency sold their assets following a rule change by regulators.

The Merval tumbled as much as 9 percent and traded 2.8 percent lower at a seven-month low as of 4:30 p.m. in Buenos Aires. The drop was the sixth-biggest in the world among 93 indexes tracked by Bloomberg.

A Sept. 21 resolution from Argentina’s CNV securities regulator ordering mutual funds to value dollar-denominated holdings at the official rate of 9.4 pesos per dollar rather than the blue-chip swap rate used for financial transactions is at the root of the selloff. The move was seen by some investors as an attempt to bolster the peso in the parallel market, where it takes 13.3 pesos to obtain a greenback. Stocks normally drop when the currency rises in that market.

“The local market is concerned with the implications of the CNV resolution in the midst of an adverse international context,” said Walter Chiarvesio, an equity analyst at Santander Rio in an interview in Buenos Aires.

Investors had piled into Argentine stocks earlier this year on expectations of a more investor-friendly government taking over on Dec. 10 following elections next month. Since hitting a high in July, stocks have since tumbled 26 percent on concern the front runner from the ruling party, Daniel Scioli, may delay measures to narrow a budget deficit, lift currency controls and settle with holdout bond investors that triggered a default on Argentine government notes last year.

The final securities regulator resolution on mutual funds is expected to be published in the official gazette tomorrow, according to the CNV’s press office.

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