Market Scan

Argentine Investors Cry For Themselves

Maurna Desmond, 10.22.08, 7:10 PM ET

Argentina’s steps away from capitalism are causing major shakeups in emerging markets.

The country's surprise plan to nationalize its private pension system caused its stock exchange to slide for the second day
in a row Wednesday. The country’s shift toward socialism rattled investors and other emerging markets were pulled down
with it.

The Merval index, which measures the stocks traded on the Buenos Aires Stock Exchange, plunged 10.1% to 940.8,
adding to 11.0% losses posted Tuesday.

Argentina's worrisome moves hit stock markets across the region, with Brazil's Ibovespa index down 5.0% to 37,103 and
the Mexican stock exchange fell 7.0% sharply as well. At one point, the Brazilian exchange had to close for a half hour
because the index was down 10.0%

American depositary receipts of Spain's Repsol YPF, which controls Argentine oil company YP, fell 18.9% in New York.
The company said its executives had met with Planning Minister Julio De Vido of Argentina who assured them its
investment plans were safe. YPF itself slipped just 0.3% but that brought it down to $42.90 from more than $48 at the end
of last month, when it began to decline.

Spain's Santander, the euro zone's biggest bank, which has a unit in Argentina, fell 9.9% on fears that Argentina might
eventually nationalize banks.

The iShares S&P Latin America exchange-traded fund which measures the performance of stocks in the region, lost
13.3%, or $3.53, to $23.04. The iShares MSCO Mexico ETF which tracks the price and yield performance of publicly
traded securities in the Mexican market tumbled 11.0%, or $3.42, to $27.71.

President Cristina Fernandez, an outspoken critic of speculating in financial markets as opposed to investing in real
production, said Tuesday that she would send the proposal to nationalize the country’s $30.0 billion and 14-year-old
pension system to Congress.

“The Argentine administration has been taking steps away from capitalism for the past few years and this another move in
that direction to become less like Chile, Brazil or Mexico and more like Venezuela,” said Claudio Brocado, a portfolio
manager at Boston-based asset manager Batterymarch. “What we’re seeing is contagion. What is happening in one
emerging market is having an impact on other. The administration’s proposal is affecting companies around the world with
exposure to Argentina,” Brocado said.

"The concern must be that local bank depositors withdraw money from Argentine banks either to spend on dollar-
denominated goods, such as gold, or to try and convert it into dollars, fearing that inflation is about to soar," said Simon
Smollett, an analyst at Calyon Credit Agricole.