Watch UK+France+Germany - it's a big cap region, if it's slides, US will go too. LatAm is gone already, no rally today, even with US bounce.
<<ANALYSIS-LatAm mkt storm could hurt macro picture
By Martin Roberts
MEXICO CITY, June 12 (Reuters) - Fears over a financial crisis in Japan pummeled Latin American stocks again on Friday and analysts said they saw no near-term end to the region's turbulence.
Market watchers said Latin stocks were potentially bargain buys, but investment funds running scared from emerging markets could undermine what have so far been comparatively healthy macroeconomic fundamentals in the region.
''Japan's tumbling yen affects us most in terms of capital flows rather than in trade,'' said Roberto Padovani, economist at Brazil's Tendencias consulting firm.
On Friday, Brazil's Bovespa index (^BVSP - news) stretched it's year-to-date slide to 9.5 percent, Argentina's Merval (^MERV - news) to 19.0 percent and Mexico's IPC (^MXX - news) to 19.4 percent.
Analysts said concerns that the weak yen could force a devaluation of the Chinese yuan were just the latest in a rush of international shocks to buffet the region this year.
''New problems keep popping up and they're going to continue popping up. A while ago there were rumors of problems in Russia ... Now everyone is talking about a devaluation in China,'' equity analyst Estavan Gonzalez at BBV-Banco Frances in Argentina said.
Mexican market analysts have insisted the local bourse's percent slide for the year to date in dollars terms makes stocks cheap in an economy expected to grow by 4.5-5.0 percent in 1998.
But the buyers are not there and at Friday's close of 4,215.68 points, the leading IPC index is a whopping 39 percent below the latest year-end forecast polled in a Reuters survey.
''You've had a few tentative rallies so far in Mexico, and every time ... the brave have been socked in the face, so I think the inclination is not to be brave, and head for the door and buy dollars,'' Lars Schonander, research head at Santander Investment in Mexico, said.
Mexican financial authorities have stressed the wisdom of a free-floating currency as a means to avoid a repetition of the crisis that followed a bungled devaluation in December 1994.
But Schonander added the peso currency's slide of 11.4 percent against the dollar so far this year, most of it in recent weeks on Asia-triggered jitters, could cross over into the broad economy next year.
''What's disturbing is that to the extent the markets cause the currency to weaken and push interest rates back up again,'' he said, ''there can be a change in the fundamentals of the economy, which has been a positive force throughout this period.''
The analysts were pinning their hopes of a regional recovery in equities on macroeconomic fundamentals weathering a storm in Japan, Russia and China.
Salomon Smith Barney Latin America Strategist James Barrineau wrote in a research report Friday that; ''absent a Russian or Chinese forced devaluation or a yen free fall, they (fundamentals) should (withstand contagion).''
''I don't think we're going to get a turnaround until Japan convincingly demonstrates to the world that it's going to solve its financial crisis,'' Schonander said. >> |
