LatAm stocks slump on global woes, eye IMF meeting
Reuters, Thursday, September 03, 1998 at 17:09
By Noriko Yamaguchi
SAO PAULO, Sept 3 (Reuters) - Major Latin American stock
market indices were posting big losses on Thursday, even as
government finance officials from around the region met at
International Monetary Fund headquarters in Washington, in a
bid to prevent further fallout from overseas economic trouble.
Traders and analysts said the region's stocks, already
pressured by global woes, were now reeling amid new worries
that investors may flee Latin America after Colombia announced
a de facto devaluation of its currency on Wednesday.
Market players worried that neighboring countries may feel
pressured by Colombia's move, the first significant change in
any Latin American country's exchange rate policy since the
Asian crisis hit last year.
"Colombia's news is a headache for investors in the region
that are already vexed by slumping equity markets in Europe,
Asia and the United States," said Cassio Schmitt, senior
economist at Unibanco in Sao Paulo.
Schmitt said the key to solving the current financial
turmoil rested with world economic leaders, and that investors
in Latin America were betting on Thursday's IMF meeting among
the region's nine main economies.
Latin America is susceptible to a growing perception in
world financial markets that there is lack of leadership, said
Larry Goodman, chief economist at Banco Santander in New York.
"The market in part is dependent on the outcome of the IMF
summit, whether a clearer and decisive leadership from the G7
leader nations would emerge, quelling concerns surrounding
Latin American markets and a possible knock-on effect from
Russia and the developed world," he said.
In early trade Thursday, MEXICO's stocks floundered with
its blue-chip IPC index <.MXX> dropping more than 1 percent
shortly after the open.
In Washington, attending the IMF meeting, Mexico's Central
Bank governor Guillermo Ortiz said the falls were "a reflection
of worldwide instability."
Mexico's overnight interest rates rose sharply early on
Thursday as the Mexican peso tumbled. "It is a problem of
contagion," he said of instability spilling into Latin America.
Meanwhile, Venezuelan shares were testing their downside
with the 15-share IBC index <.IBC> plunging over five percent.
Regional analysts said Venezuela would come under the spotlight
following the forex policy change in Colombia, which is
Venezuela's second largest export market.
In Brazil, the Bovespa index (INDEX:$BVSP.X) plunged over four
percent by midday. "The market is totally hinging on news from
overseas. Some investors are worried that a de facto
devaluation in the Colombian currency may put more pressure on
Brazil and Mexico's currency," said one Corretora & Doria
Atherino trader.
But Brazil's currency, the real, was so far weathering any
negative impact, trading at around 1.1780 to the dollar.
In Argentina, stocks were lower in early trade after
declines on Wall Street and in neighboring Brazil.
Traders said there was some disappointment in the market
that the bounce seen at the beginning of this week had faded.
The blue-chip Merval index <.MERV> slipped over 2 percent by
midday.
Chile's bourse was also slumping by midday, with investors
nervously eyeing the fall in Russia's rouble and more trouble
in emerging markets. Santiago's IPSA index <.IPSA> of the
leading 40 stocks lost over 1 percent after giving up 2 percent
on Wednesday.
noriko.yamaguchi@reuters.com))
Copyright 1998, Reuters News Service |
