- Argentine markets celebrated the electoral victory of Javier Milea, who advocated a dollarization platform.
- Bonds recorded their highest daily trading volume since January, while stocks listed on U.S. exchanges rose.
- However, the candidate will still face challenges in implementing reforms.
Dollar-based markets in Argentina are on the rise after libertarian Javier Milei won the second round of the presidential election on Sunday.
A broader-than-expected victory for the pro-dollarization candidate led to the largest intraday bond gain since January, Bloomberg reported. Early Monday, Argentine dollar bonds maturing in 2041 rose 6.7% to 30 cents on the dollar.
The election result also catapulted gains in U.S.-listed Argentine stocks, with shares of oil producer YPF rising 36% in morning trading. Similarly, Grupo Financiero Galicia and Banco Macro, two regional lenders, grew by 24% and 20%, respectively.
Investors can also watch the peso exchange rate fluctuate throughout the week. Although Monday’s national holiday kept the domestic market closed, since Friday the peso has already lost 8% in the country’s informal markets, which are more attuned to free market flows.
The peso level is likely to continue to decline, especially if Milei successfully implements economic reforms.
Through the elections, this political outsider gained popularity with the idea of abandoning the peso and adopting the US dollar in order to stop runaway inflation in Argentina.
Although full dollarization was criticized by economists and business leaders similarly, Milea’s surprisingly large victory (56% to 44%) over opponent Sergio Massa may signal that the Argentines are willing to take a risk and take a more radical approach.
“The model of decadence is over, there is no going back,” Milei said in a speech after the election results were announced.
However, despite his victory, many challenges remain, such as his lackluster support in the Argentine Congress.