October 31, 2008 / 10:07 PM / 12 years ago

Argentina markets rise despite S&P downgrade

(Updates with closing prices)

BUENOS AIRES, Oct 31 (Reuters) - Argentine bonds and stocks rose on Friday despite a Standard & Poor’s sovereign credit rating downgrade, which investors saw as predictable move that did not remove buying opportunities among the country’s low-priced assets.

Benchmark stocks index the MerVal .MERV rose 3.82 percent to 1,010.79 points, but lost almost 37 percent in October. Volume on the broad market was moderate at $33 million, with 56 advancing stocks, 20 decliners and seven unchanged.

Market heavyweight Tenaris TENA.BA, which makes steel pipes for the oil industry, helped pull the index up by jumping 6.24 percent to 38.3 pesos per share on higher crude prices.

Argentine stocks, bonds and peso currency all had steep losses in October due to the global financial crisis and a surprise announcement by the government that it plans to take over the country’s private pension system.

That move was seeing as potentially drying up liquidity on the local market by removing major players, and it also raised fears that the government was taking desperate measures to be able to meet debt payments next year.

On Friday Standard & Poor’s cut Argentina’s sovereign credit rating for the second time in less than three months, to “B-“ from “B,” six notches into junk bond territory.

The government lashed back saying its finances were in good shape for next year and questioning S&P’s credibility. Also, the planning ministry announced big cuts in energy subsidies that will save the government more than $300 million a year.

On the foreign exchange market, the central bank made hefty dollar sales on Friday in order to prop up the local currency, which has been pressured in recent weeks due to safe-haven dollar-buying by savers and local companies.

“The central bank offered to sell about $400 million at 3.379 (pesos per dollar) when demand was pressuring the peso,” one currency trader said.

The peso slipped just 0.07 percent to close at 3.3850/3.3900 per dollar in formal trade between banks ARS=RASL.

The peso has been trading at levels not seen since a currency devaluation in 2002 when the country was in an economic and political crisis.

In informal trade between foreign exchange houses, as measured by Reuters, the peso nudged down 0.14 percent to 3.4700/3.4800 per dollar ARSB=, accumulating a slide of 10.3 percent in the month.

In the local debt market, sovereign bond prices rose an average 1.5 percent, up for a second day in a row after 11 sessions of losses. During October the average price of locally traded government debt has plunged by 62 percent.

Dollar-denominated 2038 Par paper gained 5.4 percent ARPARD=RASL, while the dollar-denominated 2033 Discount bond also rose 5.4 percent ARDISC=RASL.

Reporting by Walter Bianchi, writing by Fiona Ortiz, Editing by Kenneth Barry

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