WEEKAHEAD-Latam stock markets to watch Iraq, U.S.

www.forbes.com Reuters, 01.12.03, 3:49 PM ET

MEXICO CITY, Jan 12 (Reuters) - Latin American stock investors will monitor the U.S. economy and corporations as well as the world political stage next week, while investors in Argentina will watch to see if the government closes a badly needed aid deal with the International Monetary Fund. CHILE's bourse is expected to rise this week, though important reports on the state of the U.S. and local economies could be the deciding factor, analysts said. All eyes will be on the United States on Wednesday when the Federal Reserve issues the Beige Book summary of the health of the U.S. economy. "If the report is optimistic, it could push up the stocks. If not they could fall," said Cesar Perez, analyst with Celfin brokerage. Chile's top export market is the United States and the two countries reached a free trade agreement in December. Chile's market will also closely watch the first annual earnings reports of important U.S. companies which are due to start filing through this week, said Rodrigo Cristi, analyst with Alfa brokerage. On the domestic market the most important news of the week will be the Central Bank's release of the November economic activity index (IMACEC) and December trade balance on Friday. "The IMACEC will show us where the economy is going and also will provide data on imports and exports which will give an idea of the internal and external demand," Perez said. However, Cristi maintains the IMACEC is unlikely to influence trade in the first four days of the week and that U.S. company reports will weigh much more heavily. The IPSA blue-chip index <.IPSA> gained 0.02 percent on the week to finish on Friday at 1,030.20 points. With little local macroeconomic news scheduled for release next week, MEXICAN stock investors, who traded relatively few shares last week, are unlikely to bid stocks higher, and instead will probably remain cautious as they watch the U.S. economy and ongoing crises with Iraq and North Korea. "The market won't necessarily be more bullish next week, but there should be more volume," Prudential Apolo trader Pablo Miller said. Since before the holiday season the Mexican market has suffered from faltering volume, which has led to higher price volatility, because investors have been wary of making new bets in the face of world economic and political uncertainty. "It's the beginning of the year. You have to do something with the money that's been liquid since the end of last year," he said. Mexico's IPC benchmark stock index <.MXX> gained 0.36 percent to close at 6,353.03 on Friday after the central bank tightened its monetary policy in order to get a jump on its 2003 fight against inflation. For the week the IPC index added 1.59 percent. The central bank increased the amount of cash it holds back from the market, called the "short," to 550 million pesos from 475 million. "The increase in the short was taken well. It wasn't expected by everyone, so it definitely had an effect on the market," said Juan Carlos Flores, a broker at Mexico City's Vector brokerage. In BRAZIL, investors remain cautiously optimistic about the coming days after a strong run in the first two weeks of the month, backed by growing confidence in the new left-wing administration of President Luiz Inacio Lula da Silva. The Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index closed on Friday at 12,243 points, up 8.7 percent since the start of the year. "The only factor holding us back is the threat of war abroad. I think locally we still have some space to rise, but it's going to depend a lot on foreign news," said Flavio Barros, a trader at Sao Paulo's Clickinvest brokerage. Investors hammered Brazil's stock market for most of last year, worried that Lula would bungle Brazil's economy, Latin America's largest, if elected. But since his landslide victory in October, markets have warmed up to the formal metalworker after he appointed a market-friendly economic team that has vowed to stick to conservative economic policies. "There's relative optimism. We like the speeches and we're going to want to see some action. But we also have to give them some time," Barros said. ARGENTINE stocks fell on Friday as investors took advantage of recent gains amid high expectations the government will soon close a short-term aid deal with the IMF. Leading stocks rose an average of 15 percent this week as an accord looked close. Traders said they expect the market to remain stable next week, without big gains, as investors await more news from the IMF. Shares slid 2.6 percent on Friday to close at 575.8 points on the benchmark Merval <.MERV> stock index. Traders said the profit taking ahead of the weekend was expected. "I still like what I'm seeing in the market despite this correction. My feeling is that the (IMF) agreement is closer than ever," said Nestor De Cesare, a trader at Allaria Ledesma y Compania brokerage. "Given this situation, expectations are that next week we'll see investors staying in the market and simply adjusting their portfolios," De Cesare said. An IMF mission arrived in Buenos Aires on Thursday to continue negotiations with the government on a deal expected to delay around $5 billion of debt coming due through June. Argentina needs the deal to buy it valuable time to end its worst ever recession. The IMF board is expected to make a decision about a short-term lending program by Jan. 17, the day Argentina must meet a $1 billion debt payment due to the fund or face another default that would cut off its last avenue to aid.