(Updates with closing prices, details)
BUENOS AIRES, Oct 21 (Reuters) - Argentine stocks and bonds plummeted on Tuesday in anticipation of a government proposal to take over almost $30 billion in private pension funds, key players in the country’s capital markets.
But the peso currency closed slightly stronger in interbank trade, which traders attributed to the Central Bank’s injection of $300 million into the market. The Central Bank declined to provide a figure.
The MerVal stocks index .MERV slid a steep 10.99 percent to close at 1046.68 points, the lowest close since September 2004, after plunging by as much as 13.8 percent earlier in the day.
Pampa Energia PAM.BA, the country’s biggest integrated energy company, lost a dramatic 31.8 percent to 0.253 pesos per share. Pampa is weighted as 9.1 percent of the Merval.
On the broad market, volume was brisk at $36 million. Of active issues 64 declined, 23 advanced and four were unchanged.
“The big fall in the MerVal is logical given local and international circumstances. On the domestic side the nationalization of the AFJP will affect liquidity in the capital markets. On the international side you have growing signs of a recession,” said Hernan Labrone, analyst with Fenix Compania Financiera in Buenos Aires.
Government bond prices also wilted, closing down 7 percent on average in local trade, led by a 13.5 percent slide in the dollar-denominated Boden 2012 ARBODEN12D=RASL and the 11.9 percent nosedive by the dollar Discount bond ARDISCD=RASL.
In international trade, Argentina’s Discount bonds due 2033 ARGGLB33=RR fell 5.06 points in price to a bid/offer of 32.25/34.75. Argentina’s portion of the JPMorgan EMBI+ index, a measure of sovereign risk versus benchmark U.S. Treasuries, showed yield spreads widen by 218 basis points to 1,603 basis points, deep into implied default territory.
Argentine President Cristina Fernandez is expected to announce on Tuesday evening a plan to take over private pension administrators. Critics say the government wants to get its hands on extra funds ahead of a tough budget year.
A federal judge banned the country’s 10 pension fund administrators from trading on the Buenos Aires Stock Exchange for seven working days after a federal prosecutor asked for an investigation into accusations that the funds illegally sold government bonds ahead of the nationalization.
“The announcements about the end of the AFJP were not benevolent for the market since investors started to sell bonds and stocks to take positions in dollars,” said a foreign currency trader.
In interbank trade, where the Central Bank intervenes to manage the currency value, the peso rose 0.31 percent to close at 3.2100/3.2125 per dollar ARS=RASL.
In informal trade between foreign exchange houses, as measured by Reuters, the peso weakened by 0.30 percent to 3.2950/3.3000 per dollar ARSB=. (Reporting by Walter Bianchi and Jorge Ortaola, writing by Fiona Ortiz; Editing by Diane Craft)