By Marc Jones
LONDON Investors were buckling up on Tuesday as Argentina's local markets prepared to reopen after the weekend's Presidential election win of radical libertarian outsider Javier Milei.
Argentina's markets had been closed on Monday following Sunday's vote, but there were major moves in assets traded internationally, including the quasi shares of main energy giant YPF, which saw a 40% surge after Milei said he would look to privatize it.
With Milei promising to deliver economic shock therapy to the long-troubled economy, international bonds had risen too but Tuesday's action was set to be dominated by how fast and furiously the official peso rate drops.
The currency's overvaluation is seen as being at the heart of the country's economic strife. There is a gaping chasm between the official government rate and where it trades on the streets.
Morgan Stanley's analysts said on Monday they expected it to drop 80% over the next six weeks. Milei said in the runup to the election he wanted to ditch the peso altogether in favour of the dollar and shut down the central bank, too.
"The big question is obviously what happens to the currency now given Milei's comments before the elections," said Viktor Szabo, an emerging market portfolio manager at Abrdn in London
"The black market is far away from the official rates so some adjustment needs to happen. The issue is how quickly that happens."
One of the few ways both locals and internationals have been able to trade the peso over the last 48 hours has been in cryptocurrency markets which trade 24 hours a day, albeit in tiny volumes compared to traditional FX.
One tether - a cryptocurrency pegged to the U.S. dollar - was trading at 981.4 pesos, up 3.2% on the day, according to the crypto exchange Binance's website, although it was well off a high of 1120.4 seen on Sunday.
Bitcoin was up, too, at 36,856 peso per bitcoin, compared to 27,880 a month ago.
U.S.-listed shares, known as "depository receipts" of Argentine banks had also rallied. Banks Grupo Supervielle, Banco Macro, Banco BBVA Argentina and Grupo Financiero Galicia had closed up between 17-24% on Monday, while the $50.8 million Global X MSCI Argentina ETF added 11.6% to close at $46.98, its highest since early September.
Milei, who will take office on Dec. 10, did not refer to "dollarization" in his first speech, raising questions about how quickly he might pursue scrapping the peso entirely.
He has pledged wholesale economic change for the battered economy, where inflation is at 143% and set to spiral as the peso devalues. FX reserves are depleted and currently more than $10 billion in the red.
Milei had also heavily criticised China and Brazil in the runup to the elections, two of Argentina's main trading partners. China said on Tuesday it would be a "serious mistake" if Milei opted to cut ties between the two countries.
(Reporting by Marc Jones; Editing by Bernadette Baum)