WEEKAHEAD-Latam stocks seen roiled by
US rate fears
Reuters Company News - July 30, 2000 12:33
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By Susan Schneider
MEXICO CITY, July 30 (Reuters) - Latin American stock markets will keep
an eye on their powerful northern neighbour this week, with the possibility of
another U.S. interest rate threatening to wreak havoc in Mexico and Argentina.
After the U.S. government reported on Friday that gross domestic product
grew at a breakneck 5.2 percent pace in the second quarter, investors around
the world are betting on another rate increase by the Federal Reserve.
Rate jitters are likely to hit particularly hard in Mexico, thanks to its heavy
dependence on the United States for export revenues, and in Argentina, where
the peso currency's peg to the dollar makes the nation particularly sensitive to
rate jumps.
Brazil's battered stocks could fare better as traders see conditions ripe for a
turnaround, though any rebound is expected to hinge heavily on a strong
showing in U.S. markets.
That leaves Venezuela as the potential bright spot of the week.
An expected win by President Hugo Chavez in Sunday's presidential election
could prompt investors to gamble that he will stick to his pledge to dedicate
more time to fixing the country's economy.
MEXICAN stocks are vulnerable not only to investor worries about a U.S.
rate increase but also to the lingering effects of a U.S. decision to take action
against Mexico for failing to curb the monopolistic powers of telephone giant
Telmex.
Telmex , the heaviest weighted share on Mexico's index , slid nearly 6 percent
on Friday on the news, which could increase pressure to break up what Telmex
rivals see as a near monopoly.
"Obviously this affair over the monopoly is punishing Telmex shares and for that
reason the whole market is falling," said one trader.
Analysts say that although the majority of Mexican companies reported strong
earnings in the second quarter, a few notable exceptions tempered an otherwise
positive period, including Telmex.
ARGENTINE stocks may extend last week's 4.4 percent slide as investors
brace for another increasingly likely U.S. interest rate increase.
The benchmark Merval index appeared to be in for a rocky road at least in
coming days, though traders said its long-term prospects are not menaced by
rising U.S. rates.
"We're being careful, buying very cautiously. Conditions are not that good for
the short term. For the long term, however, I would buy," said Mariano Arnau,
a trader for Raymond James Argentina.
BRAZILIAN shares, which have been battered lower in thin volume by
successive losses on Wall Street, may be poised to climb but there are clouds
on the horizon if key foreign markets see-saw or a public graft scandal grows,
traders said.
"The (Brazilian) market could post a good turnaround next week," said
Roberto Dotta, fund manager with Tudor Asset Management in Sao Paulo.
"The fundamentals are very positive."
But lingering worries that a public scandal will implicate high-ranking
government officials could also cloud the market, said dealers. The case
involves graft of some $100 billion dollars destined for a public building project.
Brazil's benchmark Bovespa index lost 5.2 percent last week to end at a
two-week low of 16,485.6 on July 28. The index is down 3.6 percent since the
start of the year.
VENEZUELAN shares could be the beneficiaries of investor relief that the
nation's extended period of political reforms has ended.
Sunday's vote was Venezuela's sixth national election in less than two years and
follows congressional and presidential votes in 1998 and two referendums and
the election of an assembly to write a new constitution in 1999.
The market's IBC share index rallied 2.5 percent last week on opinion polls
showing a comfortable Chavez victory.
In CHILE, the market was expected to endure a volatile session on Monday,
the last day for companies to turn in their second-quarter results, traders said.
The peso , which hit a historic low on Friday, will also be an influential factor as
it has been pressuring equities as of late, they said.
The IPSA index of leading stocks is emerging from a turbulent week after
Friday's 1.79 percent decline to 95.68 took the week's plunge to 4.17 percent. |
