BUENOS AIRES, Nov 12 (Reuters) - Argentine stocks made a U-turn in the afternoon and closed higher after a volatile session, pulled up by Wall Street gains, but bonds and the peso weakened on concerns over risky emerging markets assets.
The MerVal benchmark index .MERV rose 0.75 percent to 1,015.9 points after falling by as much as 4 percent earlier in the session, and after four days of losses.
Pampa Energia PAM.BA, which has energy generating, transmitting and distributing businesses, rose 2.96 percent to 0.8 pesos per share. Pampa is weighted as 9 percent of the MerVal.
But traders said the bounce in Argentine stocks was weak considering that the Dow Jones Industrial Average .DJI was up more than 5 percent in afternoon trade, because investors are still concerned about local policy after the government launched a plan to take over the private pension fund system.
"The domestic situation makes it hard for investors to return, especially foreign investors, because they still believe the lack of clear rules makes it a complicated situation here," said Guido Macchi, trader with Macchi brokerage.
On the broad market, volume was muted at $21 million and of active issues 16 advanced, 30 declined and 16 were unchanged.
Sovereign bonds traded in the local over-the-counter market fell 2.7 percent on average, with the 2033 dollar-denominated discount bond plunging 6.8 percent to an ask price of 27.40 ARDISCD=RASL.
Traders said investors were prioritizing liquidity and reducing exposure to emerging market assets due to doubts about how the United States was managing a bailout of its financial sector.
And, on the local front, investors have increasing concerns about the government's economic policy after a surprise move last month to nationalize the private pension fund system.
"It's not the best outlook and any opportunity to get liquidity is good," said one trader.
The peso slid by 0.23 percent to 3.3100/3.3125 per dollar ARS=RASL in formal interbank trade, and slipped 0.15 percent to 3.3800/3.3850 per dollar ARSB= in informal trade between foreign exchange houses, as measured by Reuters.
Traders said the peso would have weakened further if it were not for measures by the central bank to hold it fairly steady. (Reporting by Walter Bianchi and Jorge Otaola, writing by Fiona Ortiz; Editing by Diane Craft)