Shares in Argentina's biggest energy company, YPF SA, tumbled on Tuesday owing to growing investor fears that the government plans to seize control of the oil firm.
YPF, controlled by Spanish oil major Repsol YPF SA, has seen its market value fall by almost a third this year, and its stock closed down 16 per cent in Buenos Aires, hitting its lowest level since May, 2010.
The company's U.S.-listed shares fell 15.5 per cent to a three-year low on Monday, a holiday in Argentina, battered by weekend media reports that Argentine President Cristina Fernandez had made up her mind on the need for state control of the company.
Pagina 12 newspaper, which is seen as reflecting government thinking, said internal debate was now focused on how to proceed. YPF officials declined to comment and government officials have not yet reacted to the reports.
The newspaper said possible options included expropriation and state intervention, including the purchase of YPF shares. It said government officials were determined to reverse falling energy output in order to reduce fuel imports that more than doubled last year.
Protecting the trade surplus is a priority for Ms. Fernandez, a centre-leftist who nationalized private pension funds and the nation's flagship airline in 2008, because her government uses foreign currency reserves to pay its debts.
Investor jitters over a possible intervention or takeover of YPF have pressured other Argentine assets in recent days.
"The recurrent headlines for a buyout of a … stake in YPF suggest [Ms. Fernandez's]administration remains undeterred on a policy approach of market interventionism," said Siobhan Morden, head of Latin America Strategy at Jefferies & Co.
"The policy risk should continue to weigh on sentiment."
The spread between the yield on benchmark Argentine bonds and comparable U.S. Treasuries widened two basis points to 903 basis points at 20:30 GMT, according to the JPMorgan Emerging Markets Bond index, underperforming the index.
Further pressure on YPF's stock came from weekend comments by the governor of Argentina's top crude-producing province, Chubut, who said he was advancing with plans to revoke YPF's concession on the key Manantiales Behr field on the grounds of insufficient investment.
Six provinces, including Chubut, have already stripped operating licences from YPF, but most have been marginal in terms of overall output.
Manantiales Behr accounts for about 10 per cent of the company's national oil output, and any effort to rescind the operating licence would likely spark further legal action by YPF, which has accused Chubut of singling it out unfairly.
The cost to insure Repsol YPF against default over a five-year period rose to around 2.5 per cent annually of the face value of the debt, according to Markit quotes of credit default swaps earlier in the day.
According to Markit, the cost to insure Repsol YPF debt was 3.4-per-cent higher on Tuesday than on Monday, and 19.5-per-cent higher than a week ago.