Argentina braces for market reaction after Fernández wins election

President-elect Alberto Fernández has barely time to savour his emphatic triumph in Argentina's elections before facing the challenge of trying to dampen likely volatile market reaction to his victory on Monday.

Fernández is scheduled to have an early breakfast meeting with President Mauricio Macri at the Casa Rosada palace to begin cooperating on damage limitation as Argentina swings from Macri's market-friendly policies back to Peronist protectionism.

"How the markets react will depend a lot on how the two candidates react," said Raul Aragon, analyst at Argentina's La Matanza University.

"It is very important that they immediately give a sign of tranquility to the markets and society and this they will have to do together, they will have to take action together," he said.

"Tomorrow it will be pretty bad, there will be a lot of pressure on the peso and the banks," said Nicolás Saldias, Latin American expert at the Wilson Center. 

While most of the market reaction has been priced in ahead of an anticipated Fernández victory, "the markets will be negative," he said.  "Macri is president, but Alberto Fernández has the power. There has to be some signal that they are working together. If there is no coordination the situation could quickly get even worse."

The return to power of protectionist Peronists comes amid a lengthy recession and a debt crunch, raising market fears of a possible default on a US$57-billion IMF loan.

The peso fell 5.86 percent in the week before the elections, and the week ended with the dollar at 65 pesos.

Outright win

Fernández, a 60-year-old law professor, had 48 percent of the votes – easily crossing the threshold for outright victory – after 99 percent of the votes had been counted, with center-right incumbent Macri trailing at 40.44 percent. 

His win also caps a remarkable political comeback for his running mate, ex-president Cristina Fernández de Kirchner, who will be his vice-president despite facing a slew of trials over graft stemming for her 2007-2015 presidency. 

Fernández has insisted his government would not default but rather seek to renegotiate the terms of the IMF loan, and sought to reassure voters that their bank deposits would be safe under his administration. 

Since Fernández's crushing victory in August primaries, Argentine savers have withdrawn around US$12 billion from their accounts.

– AFP