WEEKAHEAD - Latam stocks seen stronger, eyes on Brazil
Reuters, 07/16/2000 13:32
By Andrei Khalip
SAO PAULO, June 16 (Reuters) - Latin American stocks should mainly rise next week, though with a close eye on the Brazilian political scandal, which seemed to start fading on Friday without touching senior figures after a nervous market week.
Traders say chances are that the unraveling political scandal, which started after the opposition urged an investigation into the embezzlement of as much as $100 million in public funds from an over-budgeted courthouse construction project, could die out by the middle of next week.
In Mexico, post-election euphoria is expected to continue pushing the stocks up, though a new government line-up could bring some surprises.
As usual, operators across the region would keep ear to the ground for any U.S. economic data, which may give them tips on the future of interest rates in the world's biggest economy.
BRAZILIAN shares, which jerked back and forth at the end of the week mainly guided by newspaper headlines about the scandal, were expected to stay without a firm trend with the market's eyes on the political developments and the U.S. economy.
"Foreign markets are looking good now and our stocks could rise unless they take a scare from new twists in the scandal. Also, U.S. economic data may change the market's mood at any time," said Evandro do Reis, a trader with Indusval brokerage.
Added Celso Cenise, head of equities at Bonval Brokerage: "If there are no new big revelations in the press over the weekend, the market may well return to growth. But the risk still exists." He said the scandal should slowly end as the opposition, which was pressing for a probe, seems to be also involved in the case.
A note published in a local newspaper showed President Fernando Henrique Cardoso authorized an increase in funds for the over-budgeted project. The government says Cardoso is not involved, and in its turn bit back on the opposition, saying the Workers Party's representatives had also authorized the funding.
The benchmark Bovespa stock index (INDEX:$BVSP.X) rose 2.66 percent to 16,880 in weak turnover, mostly recovering from a sharp 3.6 percent dive it took on Thursday. The Bovespa is now 0.9 percent higher since the start of the month, but is still 1.2 percent lower than at the start of 2000.
ARGENTINE stocks were seen continuing their upward march next week, following a trend that has seen the benchmark MerVal <.MERV> index close a session with overall declines only twice since June 26. The MerVal closed 1.8 percent higher on Friday.
"We should see more gains because the overall mood seems to be dragging things up, but foreign markets could change that. (Last) week's tumble in Brazil was further proof that when it rains abroad, we tend to get wet too," said Mario Zawadzki, a trader for Schweber y Cia brokerage.
Argentine analysts said they would keep a close eye on a developing political scandal in Brazil, saying market declines in their neighbor and most-important trading partner could drag down the MerVal as well.
MEXICAN stocks should remain bullish next week as confidence continues to spread following the July 2 election win by Vicente Fox of the pro-business National Action Party (PAN), ending the Institutional Revolutionary Party's (PRI) 71 years in power.
But traders warned there could be dips as the market speculates about the composition of his future cabinet, due to take office Dec. 1.
Second quarter corporate results, buoyed by a booming economy and soaring consumer demand, should also give local stocks a lift as the results season kicks off next week.
The IPC index of 35 leading shares <.MXX> ended slightly up Friday at 7435.99 points, giving it a gain for the week of 0.89 percent.
In VENEZUELA, stocks are expected to mark time this week as depressed economic conditions and a volatile political situation continue to discourage many investors from committing themselves.
The IBC <.IBC> index of leading stocks closed Friday at 6,977.70 points, down 1 percent on the week.
Since a $1.6 billion hostile takeover by U.S. power utility AES Corp practically stripped the Caracas Stock Exchange of its benchmark stock Electricidad de Caracas (VEN:EDC) trading volumes have dwindled to a trickle.
Brokers expect the small local market to remain rangebound until after presidential and legislative elections on July 30, barring any fresh acquisition news.
Despite rising crime and high unemployment, populist President Hugo Chavez remains strongly tipped to win a new six year term.
"It is a very speculative market with thin trading volume, which lacks any definite direction," said Freddy Zambrano of the Interacciones brokerage.
In CHILE, stocks are seen trading sideways as they have been for the past two months, traders said.
On Friday, the IPSA <.IPSA> index of leading stocks fell 0.21 percent to 98.64 points, down 1.03 percent on the week. The IPSA started the year at 100 points.
A slower-than-expected recovery from an 11-month recession and caution about companies' second-quarter earnings have put the market in a coma, traders said.
Copyright 2000, Reuters News Service |
