SANTIAGO – The Peso currency and benchmark IPSA stock index sank more than 3.5 percent in morning trading on Monday, its biggest drop in 6 years, after market-friendly presidential candidate Sebastian Piñera garnered less support than expected in the country’s first-round election.
Chileans voted for a successor to outgoing President Michelle Bachelet on Sunday. While the billionaire businessman will move on to a December 17 runoff against government-backed candidate Alejandro Guillier, the race is now seen as tighter than previously forecast.
Markets had expected ex-president Pinera to easily be elected to succeed outgoing leftist President Michelle Bachelet.
The Conservative candidate, who was president from 2010 to 2014, secured only 36 percent of the votes and failed to reach the 50 percent required to become Chile’s president.
The IPSA stock index closed down 5.86% at 5076.02 points, its sharpest single-session fall since 2011. The index hit its lowest level since August, but is still up 22% this year on rising copper prices and expectations Piñera will win.
The Peso suffered its sharpest depreciation against the dollar since 2013, slipping 1.68% to 637.40 per dollar.
The market moves were a “reaction to the risk that Piñera might not win the second round,” said Hugo Rubio, head of trading at brokerage BTG Pactual Chile.
Pinera has promised to cut the corporate tax rate and slash red tape in the world’s top copper producer, while Guillier wants to deepen Bachelet’s progressive policies.
Neither candidate would mark a departure from Chile’s longstanding free-market economy.