BUENOS AIRES, Oct 20 (Reuters) - Argentine stocks dropped on Monday as bank shares plunged on reports that the government will move to take over $28.7 billion in private pension plans run by banks and insurance companies.
The MerVal index .MERV slid 3.29 percent to close at 1,175.92 points, its lowest close since November 2004. Volume was strong at $30 million. Of active issues 40 advanced, 46 declined and 13 were unchanged.
Banco Macro (BMA.BA), with a 9 percent weighting on the Merval, tanked 13.4 percent to 3.8 pesos per share while Grupo Financiero Galicia (GFG.BA) (GGAL.O), which owns the country’s biggest bank, plunged 15 percent to 0.935 peso per share.
“It should have been a day for the MerVal to recover. But a nationalization of pensions generates again all sorts of doubts about Argentina’s future,” said Jorge Alberti, an analyst with Elaccionista.com specialized website.
Argentina’s sovereign bonds fell an average 1.7 percent in local trade <AR/BONOS>, led by a 4.3 percent fall in the Bonar 2013 bond, due to risk aversion in the global financial crisis context.
“The market hasn’t managed to convince investors, and any rise in prices is considered a good opportunity to sell,” said a trader in the over-the-counter market.
According to a pension fund source, President Cristina Fernandez is expected to announce on Tuesday proposed changes to the Retirement and Pension Fund Administrators, known as AFJP, which hold $28.7 billion in accounts for 9.5 million depositors.
A source at a private pension fund said the government will propose nationalizing deposits in the funds.
The 10 AFJP, mostly owned by banks and insurance companies, are the biggest institutional investors in Argentina. The value of the funds’ investments, which are 70 percent in stocks and bonds, has fallen some 40 percent on average this year, as local stocks and bonds wilted.
The peso currency closed mixed against the U.S. dollar.
In informal trade between foreign exchange houses, as measured by Reuters, the peso firmed 0.91 percent to 3.2800/3.2850 per dollar ARSB=, as more dollars from exports entered the market and eased the weakening trend of much of the last two weeks.
But in formal interbank trade the peso weakened by .31 percent to 3.2200/3.2225 per dollar ARS=RASL. (Reporting by Jorge Otaola and Walter Bianchi, writing by Fiona Ortiz; editing by Diane Craft)