WEEKAHEAD-LatAm stocks look to Brazil package
Reuters, Sunday, October 18, 1998 at 18:03
By Tiffany Woods
SANTIAGO, Oct 18 (Reuters) - Latin American stocks are set
for mixed performance early this week on speculation over
whether an expected fiscal package in Brazil will be the tonic
to deflate its bloated budget deficit and avoid a devaluation,
analysts said.
An economic team is to present recently re-elected
Brazilian President Henrique Cardoso with the plan on Tuesday,
a spokesman at Brazil's finance minister said on Friday.
Analysts expect Cardoso to unveil the measures on the same
day or shortly after next Sunday's run-off gubernatorial
elections.
Brazil, the world's ninth largest economy, will have to
save or raise at least 23 billion reais ($19.5 billion) to meet
its target of a primary budget surplus -- excluding debt costs
-- of between 2.5 and 3 percent of gross domestic product in
1999.
Once the package is worked out, Brazil could become
eligible for financial aid led by the International Monetary
Fund.
IMF managing director Michel Camdessus on Thursday said
that a deal for Brazil could come in "a few days or weeks."
Markets will also be watching to see if European countries
imitate last week's interest rate cuts in the United States and
Canada, analysts said.
In BRAZIL, shares are seen rising on optimism over the
expected austerity measures.
"The market is going to get calmer as the time for Cardoso
to announce fiscal measures nears," said Roque Sut Ribeiro, a
fund manager for Banco Marka.
"As long is there isn't some global catastrophe, we should
see Brazil stocks post some recoveries," he said.
Sao Paulo's key Bovespa index (INDEX:$BVSP.X) closed down 2.43
percent at 6,707 points on Friday before options on the
benchmark Telebras receipts (SAO:RCTB40) expire on Monday.
In MEXICO, stocks are set to wait for details of Brazil's
plan, but will also be influenced by third quarter earnings
reports which will start trickling into the market.
The leading IPC <.MXX> index gained 387 points, or 11.26
percent in the past week, highlighted by a major rally Thursday
after the cut in U.S. interest rates.
"We've still got to see Brazil's fiscal adjustment program
and the amount of (international) aid it will receive," said
Esteban Rojas, deputy director of analysis at Arka brokerage.
"We'll have to see if that removes some uncertainty, so
(until then) there will be a certain amount of volatility," he
added.
In ARGENTINA, shares are expected to temper last week's
enthusiasm with an urge to cash in gains and caution ahead of
any announcements by Brazil on its budget package.
"Things should be much calmer (this) week, with less
seesawing. But we're probably going to see a small correction
after these gains, probably leaving the MerVal at 410 points,"
said trader Lucio Bruno at Montelatici brokerage.
The MerVal <.MERV> index of most traded shares closed up
9.5 percent at 422.25 points last week boosted mainly by
selective stock picking and the surprise U.S. interest rate
cut.
The MerVal is still down 38.6 percent for the year.
In CHILE, analysts were more confident that Brazil's fiscal
package will do the trick, analysts said.
"(Stocks) should trend higher. (The fiscal package) will
probably be credible; therefore, bourses should rise and Chile
should go up in the next few weeks," said Jose Manuel Silva,
director of research at brokerage Larrain Vial.
The IPSA <.IPSA> index of the leading 40 stocks ended up
4.71 percent on the week at 66.28 points.
In VENEZUELA, investors are seen focusing on politics while
stocks are set to continue marooned in a slump which saw the
market's 15-share <.IBC> index slip 1.9 percent last week in
daily trade averaging less than $2 million.
Traders said investors were giving the market a wide berth
in the run-up to gubernatorial and Congressional elections on
November 8 and presidential elections on December 6.
Former coup leader Hugo Chavez, whose nationalistic
platform and military background worry investors, leads the
polls.
696-0161))
Copyright 1998, Reuters News Service |
