Brazil markets slide early, await boost from IMF
By Todd Benson
SAO PAULO, Brazil, Aug 5 (Reuters) - Brazilian financial markets dropped early on Monday in quiet trade, although investors remained optimistic that a new aid package from the International Monetary Fund would be announced soon, giving markets a lift.
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Brazil's real (BRBY) slid 3.2 percent to 3.11 per U.S. dollar, while the Sao Paulo Stock Exchange's benchmark Bovespa (Sao Paolo:^BVSP - News) index was down 2.2 percent at 9,631 points.
"Things are pretty quiet this morning, with everyone still in a wait-and-see mode regarding an IMF deal," said Fabio Fender, a currency trader at Liquidez Corretora, a Rio de Janeiro brokerage.
Brazilian financial markets swooned early last week on fears the United States might oppose a new IMF aid package for Brazil, but rebounded strongly on Thursday after U.S. Treasury Secretary Paul O'Neill said Washington would support a fresh deal.
The real, which has shed nearly a quarter of its value so far this year, fell about 14 percent to a slew of record lows in a three-day span, bouncing back to end the week a tad firmer at 3.01 per dollar.
O'Neill, who helped spark the market turmoil last week with an off-the-cuff remark implying that additional aid for South America's troubled economies may end up in Swiss bank accounts, is currently meeting with top Brazilian officials in Brasilia. He is also planning to visit Uruguay and Argentina.
Traders said Sunday's announcement that the United States would grant up to $1.5 billion in short-term loans to Uruguay reinforced market hopes that aid for regional giant Brazil would be forthcoming.
"The Uruguay loan is a good sign," said Celso Senise, an equities trader at local brokerage Banval. "For us, an IMF deal is the only thing that can give the markets a lift right now, because the political outlook remains the same,"
Brazilian officials are currently in talks with the IMF.
Brazilian markets have taken a beating in recent months as investors fret about the prospect a leftist could win the country's October presidential election, an event many investors fear could upset Brazil's delicate fiscal balance.
Recent polls show government candidate and market favorite Jose Serra lagging in a distant third behind two left-of-center candidates that spook markets. Few in the market are expecting the somber Serra to gain ground before free TV time for candidates kicks in later this month, traders said.
"The market has pretty much resigned itself for now to the fact that Serra won't make much headway until TV time starts," said Liquidez's Fender. "That's why all the attention is on the O'Neill visit and the IMF talks."
Market bellwether Telemar (Sao Paolo:TNLP4.SA - News; NYSE:TNE - News), which recently announced it would buy back shares totaling 250 million reais, was down 3.5 percent near noon. The telephone carrier accounts for about 15 percent of the Bovespa index.
Brazil's biggest private bank, Bradesco (Sao Paolo:BBDC4.SA - News), was down 0.9 percent after the company released second-quarter earnings earlier on Monday. The net profit of 904.2 million reais for the first half of 2002 was in line with analysts' estimates.
The Bovespa, which has lost about 40 percent of its value since the beginning of the year, announced early on Monday that foreign investors have pulled out 1.2 billion reais of the bourse so far in 2002. |
