(Adds Argentine ETFs, bank stocks up)
LONDON, Oct 26 (Reuters) - Argentina’s financial markets opened higher on Monday after pro-business Conservative opposition candidate Mauricio Macri’s surprisingly strong showing in presidential elections set up a second vote next month.
Movements in Argentina’s official peso rate are restricted by various capital controls, but two of its main internationally traded bonds jumped to record or near record highs.
Argentine exchange-traded funds (ETFs) in the United States were up almost 10 percent in early afternoon trading, with the Global X MSCI Argentina ETF up 5.7 percent, its highest level since mid-July.
Argentine U.S.-traded bank stocks also rose, with Banco Macro up 19 percent, Grupo Financiero Galicia up 12 percent and YPF SA up 7 percent. The YPF 10-year bond was up more than 4 percent, its biggest daily jump since mid-December 2014.
The country’s defaulted dollar Discount bonds, which mature in 2033, rose 3.48 points in price to a bid price of 108.586, yielding 7.296 percent on Monday morning, according to Reuters data.
They led a broad rally across Argentine assets, with the price of the euro-denominated 2038 par bond up 0.965 points in price to 61.965, yielding 7.436 percent.
With almost 97 percent of polling stations declared, Macri - the pro-business mayor of Buenos Aires - had won 34.4 percent of the vote, enough to prevent the candidate of Argentina’s ruling party, Daniel Scioli, from claiming an outright victory.
To win the Nov. 22 run-off, Scioli, who is backed by outgoing leftist President Cristina Fernandez, will need to court supporters of third-placed candidate Sergio Massa, a moderate lawmaker.
“Macri will have momentum now and Massa is now the kingmaker,” said Jan Dehn at fund manager Ashmore in London. “If Scioli wants his votes he needs to become more moderate.”
The outcome of the election will shape how the South American country tackles its economic woes, including high inflation, a central bank running precariously low on dollars and a sovereign debt default.
Scioli is backing “gradual change” and has promised to maintain popular welfare programs while Macri advocates moving to open up the economy.
Macri is seen by international investors as the candidate most likely to negotiate with a group of “holdout” hedge funds whose suit over bonds defaulted on by Argentina in 2002 caused a new and ongoing default last year.
The peso strengthened 3 percent to 15.57 per dollar in black market trade, which has boomed since capital controls were introduced in 2011. (Reporting by Marc Jones and Karin Strohecker in London, Tariro Mzezewa in New York; Editing by Catherine Evans and Bill Rigby)