Initial results from Argentina's primary election showed far-right party candidate Javier Milei in the lead, sparking a slide across the nation's stock, bond, and currency markets and prompting the central bank to dramatically increase interest rates.
According to China News Service, on August 13 local time, Argentina held its 2023 primary elections. Preliminary counts suggest the far-right "Liberty Advance Party" candidate, Javier Milei, received the highest number of votes. With 93% of votes counted, Mila garnered 30.26% of the vote, while the opposition coalition "Reform Alliance" and the ruling coalition "Unity for the Homeland" trailed closely with 28.24% and 27.11% respectively. All three will contend in the presidential elections set for October 22nd of this year.
During his post-election address, Mila implied that a win in the October elections would herald significant change for Argentina, emphasizing a need to alter the current political climate of the nation.
Following the release of the primary results, the Argentine government devalued its official peso by 18%, with the exchange rate falling to 350 pesos per US dollar. The peso depreciated by 18%, standing at 349.95 pesos against the dollar. The implied exchange rate reflected in blue-chip swaps, based on the price difference between Argentine stocks and U.S. depositary receipts, plunged 14% to 680 pesos.
The Argentine Central Bank intervened by increasing the interest rate by 21 percentage points, moving it from 97% to a staggering 118% in a bid to stabilize market sentiments.
Argentine stock markets took a hit with the MERVAL index, valued in U.S. dollars, plummeting by 14% at one point. The Argentina ETF traded in the U.S., Global X MSCI Argentina ETF (ARGT), opened 3.4% lower and at one stage was down by 8%, its most significant drop since March 2020. However, it later receded from its lows. Meanwhile, Grupo Galicia Financial ADR (GGAL) saw a drop of up to 17% but subsequently regained some of its value.
Argentinian bonds also suffered, particularly in European trading.
The ripple effects of Argentina's market performance affected multiple South American currencies. The Colombian peso depreciated by 2% against the U.S. dollar, while the Chilean peso reached its lowest point in 2023, falling below 868 pesos to the dollar.
Market analysts highlighted that given the tight competition and close support among the three leading parties in the Argentine elections, a clear winner in the October 22nd vote is unlikely. The election will almost certainly go to a second round in November, with investors bracing for further uncertainties.
