WEEKAHEAD - LatAm stocks back in style, more gains seen
Reuters, 07/9/2000 13:14
By Brian Winter
BUENOS AIRES, July 9 (Reuters) - Latin American stock markets were seen building on last week's gains as investors, relieved by last weekend's trouble-free election in Mexico, clamored to add regional shares back into their portfolios.
Brazil saw last week's lowering of its benchmark domestic interest rate as an added incentive for investors. Analysts encouraged shareholders in Mexico to ride out gains and see just how high the market would go.
Argentine investors expressed optimism that the Buenos Aires bourse could extend gains following nine straight sessions of advances.
Chilean shares were seen taking their cue from Wall Street while Venezuelan stocks are expected to drift lower ahead of the country's July 30 general elections.
BRAZILIAN shares may ride high this week after the Central Bank on Friday cut the country's key interest rate for the second time in less than three weeks, a move that could boost company profits as growth and consumption pick up.
The Bovespa index (INDEX:$BVSP.X) could top Friday's four-month high level this week as investors snap up companies that are set to gain from lower lending rates, traders said.
"People are very optimistic about the Bovespa in the near-term," said Marcelo Mesquita, research director at UBS-Warburg Dillon Read in Rio de Janeiro. "With falling interest rates, we'll also see a lot of money moving from fixed income assets into stocks."
The Central Bank Friday cut the benchmark interest rate to 17 percent from 17.5 percent after knocking down rates from 18.5 percent on June 20.
Telecom shares like Telemar (SAO:TNLP4) and Brasil Telecom (SAO:TCSP4) and other consumer-based stocks could get a boost this week, traders said.
Brazil's benchmark index closed on Friday at its highest level since March 31 after gaining 1.45 percent to 17,598. The index rounded off the week up 5.2 percent and has risen 3 percent since the start of the year.
In MEXICO, shares were seen extending their rise toward the 8000-point mark this week as sentiment over the country's outlook remains positive after the historic July 2 presidential vote where the election of Vicente Fox put an end to 71 years of one single party rule, traders said.
The IPC index <.MXX>, grouping Mexico's 35 most-traded shares, rose 0.88 percent on Friday to close at 7370.38 points. In the week, stock prices firmed 6.07 percent.
Amid post-electoral enthusiasm, shares notched hefty gains early last week allowing the entrance of profit takers afterward. However, the downward correction was short-lived.
"The rally should continue toward 8,000 in the short term (assuming U.S. events allow)," said in a report Geoffrey Dennis, Salomon Smith Barney's chief Latin America strategist.
"We advise investors to ride this rally rather than look for opportunities to take early profits."
In ARGENTINA, investors marveled at the sudden optimism regarding the local economy and said that gains would continue as large international brokers returned to the Argentine bourse.
The MerVal closed Friday with its ninth straight advance and is up 13.9 percent since its bullish string began on June 26.
"I guess this can't go on forever. Common sense says we're due for a correction. But this level of capital flow looks set to continue, and feeling about the Argentine economy is good, so we could see even more gains next week," said a trader.
With little news on the homefront, CHILEAN stocks are seen taking their cue from Wall Street, as they did for most of last week, traders said.
The IPSA <.IPSA> index of leading stocks advanced 0.51 percent to 99.67 points on Friday, ending a modest 1.17-percent higher on the week.
Chile's central bank will gather for its monthly monetary policy meeting on Tuesday. Analysts do not expect it to hike interest rates.
"The economic recovery has been slower than expected, so it is unlikely that the central bank would raise rates at its next meeting," said Ariel Wigodsky, analyst at brokerage Intervalores.
VENEZUELAN stocks were expected to drift lower in sluggish trade as investors shy away from Venezuelan assets in the run-up to general elections on July 30 in which left-leaning President Hugo Chavez is expected to win reelection.
Despite strong prices for principal export oil, investors remain concerned about the direction of Venezuela under Chavez who has eschewed what he terms "savage capitalist" policies and vowed to crush "corrupt oligarchs".
Chavez last week ordered private companies to raise wages by up to 20 percent in a move that business leaders said would swell unemployment and drive many small companies out of business.
The market's IBC <.IBC> index inched 0.2 percent higher to 7,047.83 points last week in daily turnover that struggled to surpass $1 million. buenosaires.newsroom@reuters.com))
Copyright 2000, Reuters News Service |
