Argentine bonds, stocks rally after Kirchner death - Reuters

* Stocks .MERV open up 1.1 percent, peso dips

* Locally traded bonds rise an average 4.0 percent

By Jorge Otaola and Walter Bianchi

BUENOS AIRES, Oct 28 (Reuters) - Argentine bonds and stocks rose in opening trade on Thursday, boosted by investor confidence a day after the death of former President Nestor Kirchner.

For more on Kirchner see [ID:nN28110442].

Investors had disliked the unorthodox economic policies of Kirchner, who was a key power broker in the current government of his wife, President Cristina Fernandez, and who had been expected to run for a second term in October 2011 elections.

"The rise in stocks and bonds reflects expectations for a shift to economic policies that are more closely aligned with the markets," said Roberto Drimer, an analyst for VaTnet Financial Research.

Locally traded Argentine bonds rose 4.0 percent on average in opening trade. Among the biggest gainers was the dollar-denominated Disc ARDISCD=RASL, which rose 6.2 percent to an ask price of 94.60.

Argentina's portion of the JP Morgan EMBI Plus sovereign bond index 11EMJ widened 2 basis points to 535 basis points, after reaching its tightest in 31 months earlier in the session. The index overall was 1 basis point tighter.

The benchmark MerVal .MERV stock index was up 1.43 percent at 2,962.27 in morning trade boosted by speculative buying, with gainers led by media group Grupo Clarin (CLA.BA)(GCSAq.L), which was up 34 percent at 19 pesos per share.

The government has been battling with Clarin for more than two years. Kirchner frequently accused it of trying to destabilize his wife's administration while the media group in turn accuses officials of a campaign of harassment.

On the foreign exchange market, the peso weakened 0.12 percent to 4.0350/4.0400 per U.S. dollar ARSB= in informal trade between foreign exchange houses, as measured by Reuters.

In formal interbank trade, the peso was down 0.06 percent at 3.9575/3.96 per dollar ARS=RASL.

Market sources said they do not expect sudden movements on the peso due to the central bank's policy to continue intervening in foreign exchange markets and accumulating foreign reserves. [ID:nN25268824] (Writing by Luis Andres Henao; Editing by James Dalgleish)

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