Latam Markets Up On Slower Brazil Dollar Outflows
07:35 a.m. Sep 20, 1998 Eastern
By Axel Bugge
BUENOS AIRES (Reuters) - Latin American financial market closed higher Friday as investors' spirits were buoyed by news that the flight of dollars from Brazil was slowing and that an agreement was reached to bolster the banking system in Japan.
A late upward push in the Dow Jones Industrial Average after oscillating in and out of the red most of the session on ''triple-witching,'' gave the regions' markets a final upward spurt, sending many to session highs at the close.
Triple-witching is the simultaneous quarterly expiration of stock index futures, stock index options and stock options contracts.
''The trend is the same, Latin America is looking better, although not enough to change all perceptions,'' said a trader in Mexico city, echoing similar sentiment in other regional centers.
Just $207 million left Brazil Thursday, compared with last week when daily outflows were more than $1 billion on several occasions until a sharp interest rate hike to 50 percent convinced some investors to keep funds in the country.
Brazil's Bovespa stock index closed 4.31 percent higher after spending most of the session just above 2 percent up.
Sentiment on Brazil improved this week on rising belief there would be financial help, if the need arises, from rich nations and lending institutions.
''Brazil has won some time to get to the elections without huge risk,'' said Jose Antonio Pena, chief economist with BankBoston in Sao Paulo, referring to the Oct. 4 general election.
Mexico's leading IPC share index finished 2.37 percent higher. The country's peso gained against the dollar on the calmer mood across Latin America as did prices on the country's key overnight Cetes treasury bills, bringing their rates down 3.80 percentage points to 32.70 percent.
Argentine markets also took heart from the firmer tone in its major trading partner Brazil, with the local Merval index closing up 2.91 percent.
''The market is a bit better because outflows from Brazil have decreased some and that is in principle a good sign,'' said Nicolas Max, a fund manager at Santander Investment in Buenos Aires. ''It's putting the market in a better mood.''
Firmer bond prices across the region helped boost stock markets. Brazil's global bond due 2027 was up 3/4 of a point late Friday, Mexico's was up a point and Argentina's was up 7/8 of a point.
Traders said there was some optimism on the plan agreed by Japan's political leaders Friday on banking reform, hoping it could spell the beginning of a restructuring that would bolster the country's financial institutions.
But market players said fears of devaluation pressures on Brazil, the region's largest economy, persist.
As a reminder of those continuing worries, Dresdner Kleinwort Benson said Friday in a research note that it viewed Latin American market gains early this week as an opportunity to take profits.
''We would treat the recent rally in the Latin American equity markets as an opportunity to liquidate residual holdings, as we did with Asia in the first quarter this year,'' Dresdner said. ''In a global portfolio there is simply no need to participate.''
Copyright 1998 Reuters Limited. |
