WEEKAHEAD-LatAm stocks seen up on IMF, Brazil deal
Reuters, Sunday, November 15, 1998 at 18:01
SAO PAULO, Nov 15 (Reuters) - Latin American stock markets
should post gains this week after the International Monetary
Fund announced a $41 billion-plus support package for Brazil,
the region's biggest economy, last Friday, traders said.
The package, combined with a tough austerity plan that
Brazil announced last month, are expected to help Brazil fend
off a financial crisis that threatened to explode in the region
and sent bourses plunging to two and a half year lows in
September.
"The success of Brazil's efforts will greatly brighten the
economic prospects for the region as a whole," IMF Managing
Director Michel Camdessus said on Friday.
A huge wave of capital flight from emerging markets after
Russia defaulted on its debt threatened to force Brazil to
devalue its currency, a move that would have thrown Latin
America into a recession, economists said.
The loan is expected to help Brazil shore up reserves and
roll over its debt, as well as restore investor confidence in
the country.
"This will help the region as a whole," Roberto Lavagna, an
economist at Ecolatina in Buenos Aires, said Friday after the
announcement.
The Argentine bourse was to take its cues from Tuesday's
Federal Reserve meeting after a topsy-turvy week marked by
profit-taking and selective buying on quarterly earnings
results.
"Everything is going to be conditioned by the Federal
Reserve's meeting on the 17th," said trader Marcelo Cobas at
Cohen brokerage.
"The market's already discounted a cut, so if they leave
rates untouched, we could see a downward correction."
Regardless of a fundamentally optimistic view by traders,
the MerVal <.MERV> index of most traded shares closed 4.4
percent lower at 472.08 points for the week. It is now down 31
percent in the year.
In Brazil, enthusiasm could be tempered. Now markets will
wait to see if the package has the hoped-for effect of luring
investors back to Brazil.
"If nothing bad happens, the Bolsa should rise as a
function of a probable inflow of capital," one trader said.
"Foreign investors should come back, even if just to ride the
short-term surge and check out what's going to happen in
Brazil."
Sao Paulo's key Bovespa (INDEX:$BVSP.X) index gained 1.93 percent
to 7,615 points on Friday, resuming its upward trend after
three days of losses. The Bovespa fell 7.3 percent last week.
In Chile, stocks are expected to focus on the power
shortage in the central electric grid (SIC) over the weekend,
traders said.
The powerful electric sector brought down the market on
Thursday and Friday on the government's decision to authorize
electricity rationing and also on a breakdown in the SIC, which
resulted in blackouts throughout the country.
Scarce water for hydroelectric generators and operational
problems among natural gas generators have caused the shortage.
Power producer Endesa (NYSE:EOC) (SAN:END) said its San Isidro
natural gas generator was operating at full capacity on Friday
after Wednesday's technical glitch. Consequently, it could
inject needed energy into the grid and ease some of the burden
on electric companies, traders said.
The IPSA <.IPSA> index of the leading 40 stocks inched up
0.15 percent to 79.47 points on the week.
In Mexico, domestic issues such as a likely hike in
gasoline and diesel prices and budget discussions in Congress
should also weigh heavily on markets, traders said.
"The market's performance will turn on national events,
basically the budget discussions in Congress," said Carlos
Castaneda, director of research at Inverlat brokerage.
The benchmark stock index <.MXX> closed down 0.52 percent
at 4,007.62 on Friday.
In Venezuela, stocks should be cautious ahead of December 6
elections.
"The bolsa's attention is fixed on the presidential
election, and as it is still not clear who will win, investors
prefer to wait," a trader at a local brokerage said.
On Friday, the benchmark stock index <.IBC> edged 0.05
percent higher to 3,614.2 points.
shasta.darlington@reuters.com))
Copyright 1998, Reuters News Service |
