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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (22326)	5/25/2001 11:27:07 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil Early Stocks Dn 0.4% On Argentina, Politics Worry May 25, 2001 SAO PAULO -- Brazilian shares are in retreat Friday amid continuing concern about troubled Argentina and Brasilia's political outlook. At 1410 GMT, the main Sao Paulo index was down 0.4% at 14,461 points on volume of 73.1 million reals ($1=BRR2.368). Traders also blamed the negative scenario on selling across overseas markets with the Dow Jones Industrial Average down 0.2%, the Nasdaq Composite Index off 0.4% and the FTSE-100 0.6% lower. Also, there was concern about the state of the local currency, which was trading at a new all-time intraday low of BRR2.370 to the dollar by 1433 GMT. Late Wednesday, the central bank was forced to intervene by selling BRR1 billion in 10-month dollar-indexed bonds. Traders believe further intervention is possible. "If the real keeps weakening, inflation becomes a bigger concern, interest rate hikes continue and equities keep getting hammered," said a Sao Paulo-based trader. "This isn't good." The central bank Wednesday raised interest rates by 50 basis points to 16.75% for the third time in as many months. Two other factors preoccupying the equity market Friday also brought on the decline of the real: local politics and Argentina's debt swap plans. While the Argentine government Thursday gave details on its plan to swap short-term debt for longer-dated securities with the results being released June 4, the market here remained disappointed with the level of disclosure. Traders blamed the decline on the real largely because the Argentine government didn't provide any estimate on how large the swap would be. While speculation pegs the size at around $20 billion, traders said the market was worried that there wouldn't be enough investor support for such a swap. Also, investors are worried that a prominent senator who is widely expected to resign from office next week amid threats of impeachment proceedings could further damage President Fernando Henrique Cardoso's image. Antonio Carlos Magalhaes, former head of the Senate, is expected to step down Wednesday to keep his political rights after a Senate committee recommended that he be impeached for having lied about his participation in a scheme to violate vote secrecy laws. Magalhaes is believed to have information about government wrongdoing and could try to seek revenge against what he reportedly sees as betrayal on the part of Cardoso. Such a move could help the opposition gain support for a request to set up a congressional inquiry into alleged government corruption. The market fears such a move would paralyze Congress and halt key reforms. On the stocks front, Itau was up 0.5% at BRR189.00. This follows a Lehman Brothers upgrade to buy from market perform on the back of strong first quarter results. Itau is the nation's fourth-largest retail bank. Thursday, Lehman downgraded Brazil's fifth-biggest retail bank, Unibanco to buy from strong buy. Friday, the stock was off 3.7% at BRR52.00. Elsewhere, Brazilian jetmaker Embraer, which is also the nation's biggest exporter, was down 0.8% at BRR24.31 after it detailed the terms of its secondary offering that's expected to attract more than $600 million in investor funds. Meanwhile, telecoms giant Telemar was 1.9% weaker at BRR36.50, while long-distance company Embratel was 1.1% at BRR18.79. Among utilities, power heavyweight Eletrobras was 2.1% lower at BRR25.42. All quotes refer to companies' preferred share performances. -By Anthony Dovkants, Dow Jones Newswires;55-11-3813-1988; anthony.dovkants@dowjones.com