Argentine Power Companies Surge, Lead Merval Higher

   Taos Turner 
 

BUENOS AIRES--Shares of two leading Argentine power companies surged almost 13% Monday on speculation that the government might raise public utility rates.

The power distributor Edenor (EDN.BA) and its parent company Pampa Energia SA (PAMP.BA, PAM) both jumped after local media reported the government was studying a plan to raise electricity rates after a congressional election in late October.

Edenor close at ARS1.31, while Pampa closed at ARS1.66.

Adrian Mayoral, a trader at a brokerage carrying his family name, said the reports added to expectations that some of Argentina's economic policies may begin to change.

Mr. Mayoral said local stocks have been rising since a recent primary election indicated the government will lose power after the October election.

"Before and after the election, investors from outside Argentina started buying local stocks, speculating that the election result would lead to a better outlook [for the private sector]. Banks were the first to benefit from this. Energy companies had been left behind and prices were low, so it's logical they would start benefiting from the idea that prospects might change," Mr. Mayoral said.

The Merval stock rose 3.39% to 4,647.45 in volume totaling ARS104 million ($18 million).

Grupo Financiero Galicia SA (GGAL.BA, GGAL) rose 4.4% to ARS7.90 and was the second most traded stock on Monday.

The steel producer Tenaris SA (TEN.MI, TS) rose 2.5% to ARS220.

So-called GDP warrants, whose performance is tied to economic growth, have been doing very well Since Thursday, when Argentina's economy minister said the economy would grow 6.2% next year.

The TVPE GDP warrant rose 4.2% to ARS95.60, while the TVYO warrant rose 2.57% to ARS75.80.

Meanwhile, the Argentine peso weakened to ARS5.7315 against the U.S. dollar on the regulated MAE foreign-exchange wholesale market, versus ARS5.7270 the previous session.

The central bank intervenes in the exchange market daily to buy dollars and build its foreign currency reserves, while gradually weakening the peso to help exporters.

In the underground market, the peso was unchanged again at ARS9.30 to the dollar, according to the newspaper El Cronista, which publishes rates collected from black-market traders.

Strict capital controls that limit the amount of foreign currency Argentines can purchase legally have fueled a parallel illegal market for dollars where people pay a steep premium for the U.S. currency.

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