Argentine Shares Fall 7.9% as Investors Flee on Bad Debt News

Argentine stocks shed 7.9% Tuesday as a U.S. judge slapped restrictions on state property and tense talks over the country’s defaulted debt unsettled investors, traders said.

The Merval leading share index tumbled to 1,006.79 points amid heavy trading volume.

A U.S. judge froze 10 Argentine-owned properties in Washington, D.C., the second such restriction won by Cayman Islands-based investment firm NML Capital Ltd., which is seeking to recoup lost investments. Last week the firm won a court order barring the sale of Argentine military property in Maryland.

“The market’s fall is due to the new embargoes on Argentine assets and also because while talks with the IMF were constructive, the government’s posture is still tense and rigid,” said Juan Ignacio Di Santo, a trader with Bull Market Brokers.

International Monetary Fund Managing Director Horst Koehler met Monday with Argentine Economy Minister Roberto Lavagna to discuss the upcoming second review of a $13.3-billion loan deal as pressure mounts on Buenos Aires to negotiate with creditors if it wants to keep aid flowing.

The Group of 7 sent a strong warning to Argentina over the weekend to “engage constructively” with creditors stuck with $88 billion in bad debt after Argentina’s January 2002 record debt default and to fulfill pledges to multilateral lenders such as the IMF.

“Wariness about the relationship between the government and the IMF continues to keep investors wondering, and [Monday’s] key meeting did not give clear signals of progress,” Argentine Research, a local think tank, said in a report.

“For that reason we expect to see a highly volatile market in the short term,” the report said.

Argentine shares sank 7.7% last week, hit by volatility in neighboring Brazil and news of the restrictions placed on government property in Maryland. But stocks bounced back Monday, closing 3.8% higher as investors went bargain hunting.