October 27, 2008 / 9:18 PM / 10 years ago

Argentina stocks slide to 5-yr low on pension plan

(Recasts; updates prices)

BUENOS AIRES, Oct 27 (Reuters) - Argentine stocks tumbled to their lowest level since October 2003 and bonds also fell on Monday, pulled down by persistent investor jitters over a government plan to nationalize Argentina’s private pension funds.

Argentine financial markets have been battered in recent sessions by the plan announced by President Cristina Fernandez last week. Fears of a global recession and sagging confidence over the government’s economic policies have also weighed on stocks and bonds.

The MerVal index of leading stocks .MERV slid 5.67 percent to 839.77 points in light trade as pensions funds re-entered the market after a court-ordered ban ordered last week.

On Monday, the Argentine official slated to oversee pension programs under the nationalization scheme asked pension fund managers to stop buying dollars and selling government bonds.

“Until the issue over the private pension funds is resolved, falling bond prices will keep pressuring bank stocks and others lower,” said Augusto Fariea, a trader at Amirante Galitis.

Shares in Molinos food processing and grain exporting company MOL.BA broke the trend of falling shares, climbing more than than 13 percent to 8.7 pesos per share after the company said it would buy back up to $136 million in shares at 9 pesos per share.

The local securities regulator last week relaxed rules on company share buybacks as companies asked to be able to support their share prices.

Leading losers was index heavyweight Tenaris (TENA.BA) (TS.N) the world’s leading producer of seamless steel tubes for the oil industry, fell 10 percent to 27.9 pesos.

Leading Argentine banking conglomerate Grupo Financiero Galicia GFG.BA slid 7.35 percent to 0.63 pesos.

Government bonds traded locally fell on average 2 percent <AR/BONOS> after steep losses last week.

The peso currency weakened 0.61 percent to 3.2975/3.3 pesos per dollar ARS=RASL in formal trade between banks. In informal trade between foreign exchange houses, as measured by Reuters, the peso closed unchanged at 3.385/3.395 per dollar ARSB=.

“The dollar is going down because of peso needs. But I believe it is a situation specific to this moment since there is still fear in the market,” said one trader.

Argentine markets were devastated last week after the government said it would take over private pension funds holding $30 billion in investments, a move that highlighted institutional weakness and sparked fears that the government was desperate to tap funds to avoid a default.

Some 55 percent of the private pension system’s funds are invested in Argentina’s sovereign debt, some of it forced placements from the past. Another 11 percent is in local stocks, and the rest is in short-term deposits, foreign assets, and other investments.

Lawmakers are slated to begin debating on Tuesday the president’s bill to nationalize the private pension funds amid reports that cabinet ministers were pressuring them to vote on it without changing its wording. (Reporting by Jorge Otaola and Walter Bianchi; Writing by Kevin Gray; Editing by Diane Craft)

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