Argentine assets suffered a severe selloff across multiple markets.

On September 8, following President Javier Milei's defeat in key provincial elections, Argentina's stock market, currency, and bond markets all experienced sharp declines. The Argentine peso plummeted over 4% against the US dollar, while Argentine companies listed on US exchanges saw widespread stock price collapses. Analysts warned that any financial market turbulence triggered by the election results could exacerbate the Milei government's difficulties.

Meanwhile, uncertainty surrounding Argentina's economic growth prospects is also rising. JPMorgan's latest report downgraded Argentina's 2025 economic growth forecast from 5.3% to 4.7%, citing poor second-quarter GDP performance, currency volatility, and midterm election uncertainty.

**Argentina Faces "Triple Market Selloff"**

On the evening of September 8 Beijing time, Argentina's stock, currency, and bond markets all suffered sharp declines. The Argentine stock market's intraday decline was the largest since 2020. Argentina's most liquid bonds maturing in 2035 fell more than 6 cents at one point, with yields climbing to 12.8%. The Argentine peso crashed over 4% against the US dollar, reaching 1,421 pesos per dollar.

After US markets opened, Argentine companies listed on US exchanges saw widespread stock price collapses. As of 22:00 Beijing time, Banco BBVA shares plummeted over 22%, Supervielle Group fell over 21%, Financial Group dropped over 20%, Banco Macro declined over 19%, Pampa Energy and Gas Transporter fell over 17%, and YPF Argentina dropped over 16%.

Analysts attributed the selloff to President Milei's defeat in key provincial elections, which intensified market concerns about whether his economic agenda could secure political support.

In the Buenos Aires Province election held on September 7 local time, Argentina's Peronist Unión por la Patria coalition secured 47% of the vote, significantly ahead of Milei's La Libertad Avanza party's 33.9%.

Notably, Buenos Aires Province holds a key position in Argentina's political landscape. As Argentina's largest province with the most voters, it controls nearly 40% of the national vote but has historically been a Peronist stronghold.

Therefore, before the election, polls and market observers expected this would be a closely contested race, with the Milei government potentially losing by a narrow margin. However, the final election results far exceeded the expected margin of defeat, surprising market participants.

Milei acknowledged defeat that day, stating in his speech: "Without a doubt, today we suffered a complete defeat. But the economic policies we upheld when elected will not change, and we will continue to fully defend fiscal balance."

Milei had originally hoped to build momentum for the national midterm elections scheduled for October 26 through fierce competition in this province. However, this significant electoral setback has further intensified voter skepticism about his reform plans and corruption scandals. The Argentine midterm elections will involve re-election of some seats in both houses of Congress.

After the defeat results were announced, market analysts expected Argentine financial markets to face severe impact. Alberto Ades, research director at hedge fund NWI Management, predicted that Argentine stock and bond prices could fall sharply when markets open on Monday.

Alongside the electoral defeat, the Milei government faces dual pressures.

In Congress, Milei's fiscal agenda has encountered obstacles, with his first presidential veto being overturned by Congress last week, while opposition lawmakers are pushing for new spending bills.

Additionally, a scandal involving former officials, leaked recordings, and alleged kickbacks linked to Milei's sister Karina continues to dominate headlines. This has caused Milei's approval rating to fall below 40% for the first time, indicating deepening voter doubts about his governance performance.

**What's the Impact?**

Political scientist Ana Iparraguirre stated that any financial market turbulence triggered by the election results could exacerbate the Milei government's difficulties.

Ana Iparraguirre further noted that given the economic turmoil the Milei government already faces, if this result leads to a deeper crisis, it could trigger a vicious cycle.

Prior to this, Argentine Finance Minister Pablo Quirno stated that the Finance Ministry would participate in the foreign exchange market to promote market "liquidity and normal operation."

This statement has intensified investor concerns about Argentina, as dollar-denominated bonds are due for repayment in January next year, and it remains questionable whether the country can increase international reserves before then. Argentine Central Bank data shows the Finance Ministry currently holds $1.7 billion in foreign exchange deposits available to support the currency market.

Other analysts pointed out that the Milei government has consistently advocated for free market economics, supporting letting the peso float within established ranges. This decision marks a policy shift and represents the latest measure to curb financial market selloffs.

The Milei government has defended the peso by raising short-term market interest rates, increasing bank reserve requirements to absorb liquidity, and openly selling dollars in local markets. Economists warn that while these measures might ease foreign exchange pressure, they could also suppress GDP growth.

Additionally, JPMorgan's latest report downgraded Argentina's 2025 economic growth forecast from 5.3% to 4.7%, citing poor second-quarter GDP performance, currency volatility, and midterm election uncertainty.

Data shows that in June this year, Argentina's economic activity growth was only 0.5 percentage points higher than the average level in the fourth quarter of 2024. In July, automotive sales and industrial production fell 10.4% and 2.8% month-over-month respectively, though the financial, commercial, construction, and mining sectors showed initial signs of recovery.

The report noted that despite Argentina's progress in fiscal surplus and reducing inflation, political uncertainty and financial market volatility will negatively impact consumption, exports, and macroeconomic stability in the coming months, particularly as the government's multiple parliamentary defeats over the past week have further elevated domestic political uncertainty.