WEEKAHEAD-LatAm stocks may gain, eyeing U.S. Fed
Reuters, Sunday, May 16, 1999 at 17:45
By Shasta Darlington
SAO PAULO, May 16 (Reuters) - Latin American stocks should
mostly rise this week though investors will be wary of a
possible rate hike during the U.S. Federal Reserve meeting on
Tuesday, traders said.
The Fed's policy-setting arm, the Federal Open Market
Committee (FOMC), could be prompted to raise rates at its
gathering after higher-than-expected inflation data released
Friday, traders said.
The U.S. Labor Department reported that the Consumer Price
Index (CPI) rose 0.7 percent in April in the sharpest monthly
advance since October 1990. Higher U.S. rates could lure
investors away from riskier emerging markets and from U.S.
stocks, fueling profit-taking there.
Still, traders were optimistic the Fed would hold rates
steady for now.
In ARGENTINA, stocks are expected to show little activity
as investors await the outcome of Tuesday's Fed meeting. Trade
will closely track Wall Street.
Local dealers believe higher U.S. interest rates would
stanch the flow of foreign cash into the bolsa.
The blue chip MerVal <.MERV> index shed 0.1 percent Friday
to end at 546.0 5 points, bringing the week's losses to 7.45
percent. The index is still up 27 percent so far this year.
In BRAZIL, markets could extend recent gains, but will
depend on the Fed to keep rates unchanged, traders said.
But investors also will be looking for a rate cut in Brazil
Wednesday when Brazil's Monetary Policy Committee (Copom)
meets, pending the Fed's decision.
It would be the eighth reduction in two months as rates
come down following a shock currency devaluation in
mid-January.
"The Fed meeting Tuesday and the Copom on Wednesday will be
influencing factors this week," said Carlos Hokama, a fund
manager at Banco Credibanco in Sao Paulo. "If we get a rate cut
here, there is even more room for stocks to go up."
Sao Paulo's benchmark Bovespa stock index (INDEX:$BVSP.X) ended
down 1 percent on Friday, but inched up 0.8 percent for the
week and is up a whopping 82 percent so far this year.
In CHILE, stocks are seen calmer with a slight upward tilt,
with the sale of a $1.85 billion stake in the country's largest
power producer finally behind it. The takeover ended a saga in
the electric sector going back months that had kept the
currency and equities markets hostage, traders said.
Santiago-based Enersis (NYSE:ENI) (SAN:ENE), Latin America's
largest private electric holding, Tuesday acquired control of
Endesa-Chile by increasing its 25.28 percent in the generator
by an additional 30 percent.
Former shareholders of Endesa-Chile are expected to buy
stock in other companies with the proceeds of their stakes in
the power producer, dealers said.
Traders added that the market also will be keeping an eye
on the Fed.
The IPSA <.IPSA> index of the leading stocks fell 2.22
percent to 122.73 points on Friday, to end up 0.72 percent on
the week.
In MEXICO, the market's performance will also hinge on the
Fed's decision, with the key IPC index <.MXX> fluctuating
between 5,700 and 6,100 points, market watchers said.
The IPC shed 109.66 points, or 1.82 percent, to end Friday
at 5,913.20 points, resulting in a loss for the week of 0.85
percent.
Last week, the local bourse pierced the 6000-point
watermark for the first time, boosted by a still-favorable
economic picture. However, Friday's U.S.inflation data sparked
some nervousness that will linger through the FOMC meeting,
traders said.
"The Fed's meeting could stir the markets a bit as there
are fears interests rates may rise," Gerardo Copca, head of
fund management at Mexico City's Finamex brokerage told
Reuters.
"But the stock market is likely to prove solid before
this," he said.
In VENEZUELA, stocks are expected to continue their steady
rally based on a sustained recovery in the price of oil, the
country's main export, and optimism on the economic reforms of
President Hugo Chavez.
Caracas' IBC index <.IBC> fell 2.7 percent Friday amid
profit-taking to close at 6357 points, but stocks were up about
7.7 percent for the week spurred by a 50 percent rise in oil
prices since mid-February.
To the surprise of many local pundits, foreign investors
appear to ignore a new 0.5 percent financial transactions tax,
which went into effect Friday.
Finance Minister Maritza Izaguirre said in an interview
late Thursday the government had incorporated suggestions from
the stock market to moderate the impact of the tax by excluding
broking operations.
shasta.darlington@reuters.com))
Copyright 1999, Reuters News Service
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