Latam stocks unlikely to rebound quickly -analysts
Reuters, Thursday, August 20, 1998 at 20:57
By Ian Simpson
NEW YORK, Aug 20 (Reuters) - Tumbling Latin American stocks
are unlikely to rebound quickly amid gloom about emerging
markets worldwide, analysts and fund managers said Thursday.
They told Reuters that rumors about a devaluation of the
Venezuelan currency and worries about Brazil in particular were
only fueling pessimism about regional equities.
David Chon, Latin American strategist at Bear Stearns, said
the thin volume of trade in regional stocks also was helping
force down prices.
"On a fundamental basis I think that Latin American stocks
are worth quite a lot more," he said. "But I realize that
people are nervous and and the lack of buying interest does
wonders in a thin market."
Daniel Selcow, a Latin American portfolio manager at Nomura
Asset Management USA, said a sustained rebound in Latin
American stocks was unlikely until early next year.
"I'm just not optimistic about the asset class" of Latin
American and emerging market equities, he said.
Leading Latin American issues fell sharply in New York,
reflecting big downturns in regional stock markets. Among the
exchanges, the Venezuelan IBC stock index <.IBC> fell more than
9 percent and Sao Paulo's Bovespa gauge (INDEX:$BVSP.X) of stocks
dropped more than 6 percent.
One indicator of sentiment, the ING Barings Latin American
index of leading regional stocks <.LAT> fell 5.46 points, or
4.16 percent, to a record low of 125.66 points.
One telling sign of investor pessimism was the drop in
Brazilian telephone issue Telebras SA (NYSE:TBR) (SAO:TELB4).
A widely held American Depositary Receipt and a bellwether
for Latin American and emerging markets, Telebras was
privatized July 29 for $19 billion, well above the government's
asking price.
Telebras was off 3-5/8 to 88-1/4 Thursday in moderate
trade, and has fallen 29 percent since its sell-off.
Reasons for the Latin American slide include concerns that
Venezuela, a big oil exporter, would devalue its currency just
as Russia devalued the rouble Monday. Low oil prices and
worries that a populist former coup leader could be elected
president in December have fueled devaluation worries.
A second reason is Brazil's stubbornly large public deficit
and concerns that the country with Latin America's largest
economy might devalue its currency. Like the rouble, the
Brazilian real is linked to the dollar.
A third influence is the continued low prices for
commodities, such as oil, pulp and metals, which are mainstays
of Latin American economies.
In addition, Wall Street markets are stagnant at best and
there is concern about slowing U.S. corporate earnings.
Lastly, investors are generally wary about emerging
markets, be they in Latin America, Asia or Eastern Europe.
"We're quite negative in general on emerging markets," said
Richard Casey, emerging markets strategist at Donaldson, Lufkin
& Jenrette. "You've got to get some positive news and it's
plain hard to get."
Federico Laffan, a Latin American portfolio manager at
Warburg Pincus, said prices of regional commodities were down
25 to 30 percent since last year.
"We've been in this kind of market since late last year,"
he said. "Until you have some kind of stability in commodity
pricing it's unlikely to change very much."
Copyright 1998, Reuters News Service |
