U.S. traders doubt big emerging market sale
Reuters, Thursday, August 13, 1998 at 15:21
NEW YORK, Aug 13 (Reuters) - U.S. traders acknowledged a
rumor about a major U.S. institution selling between $1 billion
to $3 billion in emerging market stocks but doubted that such a
sale had occurred, given the low volumes traded on Thursday.
Traders who specialize in American Depositary Receipts
(ADRs) in New York told Reuters they suspected the rumor was
spread by a speculator.
"What better way to get things lower?" asked one of them,
referring to how a hedge fund would stand to benefit from the
panic caused by such a rumor.
"It could have been dropped by someone who wanted people to
panic so they could start picking up things cheaper," said
another dealer who handles issues from Asian companies.
Dealers, strategists and fund managers in London said
earlier in the day that the rumor had hurt the market.
"It's been a major factor today," said one trader in London.
"The rumor is that someone is bailing out of emerging
markets in a big way and the money is earmarked for the U.S.
market," said another one in London.
But their counterparts in New York said the level activity
did not validate such a rumor.
One of them said volumes traded in local markets throughout
Latin America had been at least 30 percent below normal levels.
Meanwhile, Brazil stocks were actually trading higher on
Thursday, with the Bovespa index up 3.53 percent.
One dealer who handles issues from the country and
elsewhere said such a sale by an institution could pass
unnoticed if it occurred in several markets around the world.
"Markets could suck up $1 billion no problem," he said.
Talk of an institution selling up to $3 billion has come at
a time when markets from Brazil to Hong Kong to Russia have
been beaten down by investors nervous about possible currency
devaluations and debt defaults.
Moscow's leading index closed 6.5 percent lower after
financier George Soros called for a devaluation of the rouble
and a currency board to peg it to the dollar or euro.
Russian telephone company Rostelekom (NYSE:ROS) <RTKM.RTS>,
one of the few to trade in New York, saw its ADR slip 3/4 at
7-3/8, one of its lowest levels this year.
Russia's difficulty grappling with its financial problems
have made investors nervous about emerging markets this week.
A weak Japanese yen and the possibility of another round of
devaluations among other Asian currencies have also added to
their worries.
Brazil's Telebras S.A. (SAO:TEL_.P) (NYSE:TBR), considered a
benchmark for Latin America, has been trading below 100, which
seldom occurs.
In Hong Kong, the Hang Sang index fell 2.9 percent to its
lowest close since April 1993.
ADRs enable investors to deal in foreign stock on a U.S.
exchange.
Copyright 1998, Reuters News Service |
