World bourses slump sharply

Uncertainty became more accentuated in all international markets: great funds moved away again from all risk investments and took refuge in dollar. All markets were severely affected. Wall Street lost almost 1 per cent; European bourses closed in retreat; Mexico and San Pablo slipped 4.3 per cent. Even gold was ruled out as shelter asset. In domestic market, stocks lost 4.5 per cent and bonds dipped 1 per cent. Argentina had found support for its robust economic growth in foreign low rates, high soy price (as well as all raw materials) and tax surplus. The former has already changed completely, clearly reflected in Monday's events. Soy took up again its rising course and it has already increased 10 per cent in two months. That's why it is crucial to keep primary surplus at high levels (around 3.5 per cent of GDP). Increasing governmental expenditure even more, within current international context, would only bring economy to a halt. That's why an official policy resorting excessively to Treasury subsidy is also dangerous. The world will grow less this year and such phenomenon will translate into a lower Argentine activity. We should not panic or think that the country will come to a halt. However, it will be really hard to attain the 2005 robust 9.2-per cent expansion if serious and pending economy reforms are not carried out.

Buenos Aires Stock Exchange (BASE) was not the exception: it plummeted as all other world bourses. It dipped 4.56 per cent and it has already lost all it had earned in the year. However, debt bonds suffered less. In New York, Argentine swap papers plunged up to 1 per cent and in Buenos Aires, a 0.50-per cent average decrease was posted. Retreated dollar in wholesale market calmed down local investors.

BASE fall was the greatest since November 2004. Leading stock Merval index remained at 1,512.08 points. In the last six operation days, stocks lost 10.71 per cent and during 2006, the leading stock panel settles below 2.02 per cent.

This market decline can be weighed up with another data: by the end of April, BASE had accumulated 26.5-per cent profits during 2006. In less than two months, this bourse lost everything.

The greatest decline was Banco Macro's (-6.50 per cent), followed by Tenaris (-5.75 per cent). Transaction amount was the best piece of news of the entire day since only $62.5 millions were traded because some investors are not willing to sell.

In bond market, sales were observed despite widespread uncertainty. US Treasury bond 10-year rate remained at 4.99 per cent, below the 5.21 per cent touched a few weeks ago.

Bond transaction amount between Electronic Over-the-Counter Market (MAE, its Spanish acronym) and Stock Exchange settled at ARG$ 722 millions, half the usual volume. Discount bond in Argentine pesos (really volatile) tumbled 0.63 per cent. Par in Argentine pesos (the longest bond) plunged 3.4 per cent.

Between indexed post-default bonds, top collapse was BOGAR's: 0.5 per cent. The remaining ones showed downward trends and bonds like BODEN PRE8 and BODEN 2008 came through unscathed.

Calm dollar

Meanwhile, dollar had a calm day with fewer transactions than usual, though exporters settled more than $ 50 millions. American currency opening in Siopel (market where banks operate) was weak and it kept this trend up to close, when it quoted at ARG$3.0817 for sale. In exchange agencies, dollar was sold at ARG$3.10.

Central Bank took advantage of bidden dollar to buy $ 55 millions, thus raising reserves to $ 24.8 billions. Dollar is considerably seller for Tuesday, because, after close, bid was overwhelming: $120 millions. Buyers sum the third part of that figure. There's every sign that dollar in wholesale market may retreat or hold if Central Bank keeps on buying reserves in this way.