Latin American markets roundup

www.upi.com By Bradley Brooks UPI Business Correspondent From the Business & Economics Desk Published 2/20/2003 8:01 AM

RIO DE JANEIRO, Brazil, Feb. 20 (UPI) -- Latin American stocks were mixed in light trade this week, as the potential war in Iraq weighed on investors and domestic news did little to prompt action.

Brazil's central bank on Wednesday hiked its Selic interest rate to 26.5 percent from 25.5 percent, a move widely forecast by analysts.

It was the fifth hike since October as officials try to dampen inflation sparked by a currency that shed 35 percent of its value last year.

"The interest-rate move from the central bank was expected. What was a surprise was the increase in the reserve requirements from 45 (percent) to 60 percent," said Carlos Firetti, director of BBV Corretora in Sao Paulo.

That extra move to halt inflation and shore up the local currency -- the forcing of banks to deposit more cash into the central bank -- is seen by local economists as a positive, extra step and one that further indicates the government's appetite for austerity.

But Brazilian banking stocks dived after the announcement, with investors fretting that profits may sink 5 percent or more this year as banks have less money to invest.

Bradesco -- Brazil's largest private bank -- shed 4.3 percent, while the Itau bank finished 3.47 percent off.

But Firetti and other analysts agree that the effect of the rate hike and reserve requirements on Latin America's biggest economy will be short-lived, with the potential for conflict in the Middle East continuing to drive markets.

"It is all Iraq. The main catalyst for the (Brazilian) market will continue to be the international markets," Firetti said. "Most days now the Bovespa is trading close to the Dow and Nasdaq. That is going to continue."

And it will do so in the rest of Latin America as well, with the possible exception of Venezuela, where internal troubles are hefty enough to keep investors looking inward.

Meanwhile in Mexico -- Latin America's market most closely aligned with Wall Street -- a rash of earnings reports is receiving attention, though Iraq is dominant.

On Wednesday, Bear Stearns raised Mexican equities to "market weight" from "underweight."

The investment bank said in a report that the local market had lost enough in the past two months that bargain hunters should be moving in to buy cheap stocks.

But Bear Stearns said it didn't necessarily see any "catalyst for relative strength" apart from a turnaround in the United States.

As for the markets, Brazil's Bovespa stock index finished last Thursday down 3.8 percent at 10,107 as worries about a potential war in Iraq gave investors fright. Airplane manufacturer Embraer sunk 12.3 percent after it said its delivery projections for this year and 2004 would be substantially lower. Oil giant Petrobras lost 1.7 percent as investors fretted over its future should war break out in Iraq.

On Friday, the Bovespa ticked down 0.3 percent to 10,080 as investors were sidelined on Mideast worries. Embraer lost an additional 5.6 percent. Varig airlines gained more than 7 percent after word that talks for a merger with another domestic airline were going well.

Monday saw the Bovespa gain 1 percent to 10,188 as investors cheered the government's decision to increase utility rates. Eletrobras added 2.4 percent. Fixed-line phone company Telemar gained 1.4 percent.

The Bovespa gained 2.6 percent Tuesday to 10,450 as traders tracked Wall Street. Investors were also cheered by the thought that the central bank will hike interest rates the next day. Telemar gained more than 4 percent.

On Wednesday the Bovespa shed 1.89 percent to end at 10,252. Banking issues took a beating on the new reserve requirement. Elsewhere, long-distance carrier Embratel lost 3.8 percent, while Telemar shed 2.9 percent.

In Mexico, the IPC stock index ended last Thursday up 0.5 percent at 5,791. America Movil, Latin America's largest cellular company, gained 0.6 percent in heavy trade. Broadcaster TV Azteca rose 3.3 percent. On Friday the index lost 0.3 percent to 5,774 in quiet trade. TV Azteca lost 1.8 percent after its previous gain.

On Monday the IPC gained 1 percent to 5,830. America Movil added 1.7 percent, while TV Azteca rose 2.5 percent. Tuesday saw a gain of 0.9 percent to 5,880 for the index. America Movil added 1.8 percent.

Wednesday brought a loss of 0.38 percent to 5,857 for the IPC. America Movil gained 1.24 percent in heavy trade, BBVA bank lost 1.2 percent, and Wal-Mart de Mexico shed 1.09 percent.

Argentina's Merval index closed flat at 582.5 Thursday. Banco Frances lost 2.7 percent on profit taking after several sessions of gains. But energy company Perez Companc gained 1.8 percent. On Friday the Merval lost 1.9 percent to end at 580.5. Telecom Argentina shed 9.7 percent as worries about its debt burden mounted.

Monday brought a flat close at 580. Natural gas company TGS was one of the few movers, gaining 2.3 percent. The index gained 0.8 percent to 585 Tuesday. Telecom Argentina rose 3.7 percent as bargain hunters moved in.

Wednesday saw the index lose 0.76 percent to 580.5 in sluggish trade.

In Chile the IPSA index ended 0.5 percent down at 1,013 on Thursday. Friday brought a loss to 1,011. Telecom CTC Chile shed nearly 1 percent.

The IPSA ticked up to 1,012 Monday. On Tuesday, the index fell 0.2 percent to 1,010. Utility Enersis lost 3.3 percent. Wednesday saw the index lose to 1,004 in uneventful trade.

Venezuela's IBC index gained 1.1 percent to 8,022 Thursday. CANTV, the national telephone company which comprises 40 percent of the index, lost 2.6 percent. Friday saw a small gain to 8,080 for the index.

On Monday the index gained 1.4 percent to 8,195. Tuesday saw a close at 8,212. The IBC lost 0.89 percent to 8,140 Wednesday.