DKBR cuts Latam growth forecast, alters weightings
Reuters, Friday, September 11, 1998 at 15:44
MEXICO CITY, Sept 11 (Reuters) - Dresdner Kleinwort Benson
Research (DKBR) said on Friday it lowered its 1998 growth
forecast for Latin America amid ongoing market turbulence and
had altered its weighting of Brazil and Chile. In a research
note to investors, DKBR said it was cutting its forecast for
overall Latin America 1998 gross domestic product (GDP) growth
to 2.6 percent from 3.1 percent, and to 1.3 percent from 3.6
percent for next year.
DKBR lowered its 1998 GDP growth forecasts for Argentina,
Brazil, Peru and Venezuela, while it left expectations for
Chile, Colombia and Mexico unchanged.
The firm also recommended that investors step up their
weightings in Chile at the expense of Brazil.
"We have cut sharply our GDP forecasts for LatAm. The storm
of global deflation and contagion is now battering the region
at gale force, and Brazil is directly in its path," DKBR
researchers said. "We see the crisis worsening."
It advised investors to reduce their weighting for Brazil
to underweight from neutral in a Latin American portfolio, and
to raise their exposure to Chile to neutral from underweight.
It predicted GDP growth in Argentina would reach 5.1
percent this year instead of 5.5 percent forecast earlier.
Brazil would achieve 1.2 percent GDP growth instead of 1.8
percent, Peru would achieve 2.3 percent after 3.0 percent
predicted earlier.
Venezuela would slip into recession, it estimated. DKBR cut
its 1998 growth forecast to negative 0.8 percent after 0.6
percent predicted earlier.
"A full-blown emerging markets crisis appears to be
underway," DKBR said, adding the United States would not be
spared if the storm hit Latin America.
"If Latin America goes into the deep freeze because Brazil
is forced to devalue, the United States will be significantly
impacted," DKBR said.
"Some 18 percent of U.S. exports go to LatAm. And U.S.
banks have some $76 billion of cross-border exposure to the
region," it added.
However it said Mexico and Peru, countries with floating
exchange rate regimes, at present had currencies closest to
"fair value".
"We see this as a huge advantage in present circumstances,"
DKBR said, adding this meant they were not vulnerable to the
loss of credibility that accompanies a forced devaluation of a
currency peg.
mexicocity.newsroom@reuters.com))
Copyright 1998, Reuters News Service |
