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

To: Steve Fancy who wrote (1443)	4/4/1998 10:22:00 AM
From: jeremy smith	Read Replies (4) \| Respond to of 22640

Hi Steve! Sorry for the long absence. Part travelling + part just too damned tired at the end of day to log in. OK. So what's going on? Unfortunately, I am at a loss, as are many of the dealers I've spoken to over past 48 hours. There are plenty of theories, some of which I'm sure have a basis in fact. The reality is though that this stock is very subject to SENTIMENT. And as we all know, sentiment can turn for very little reason. The major "excuse" being offered for this drop in TBR is that of concern over treatment post split. I'm sorry, but I just don't buy that. I CAN accept that there may have been SOME initial selling (vs. switching in to TELESP and the electric sector), but cannot accept that explains today's rout. This may well have been triggered by the story published locally re TBR being split at month end - a fact now officially denied. 2nd story was that the weighting of TBR in the local index was going to be dropped (currently has a 45% or so weighting). This may be true, but is unduly alarmist. All index components are re-set every 4 months, and are volume weighted. IF TBR's volume has indeed dropped relative to the rest, then it will be re-weighted downwards. Marginally. Really no big deal. A little more important, there was also a story doing the rounds that local pension funds will have their holdings restricted to 5% (!!!!!!) This might be more worrisome, but again, is a pure rumor ! As an aside, I was really interested to read on this thread that the Brazzos say there WILL be level 3 ADRs on all 12 TBR spin-offs. Far be it from me to argue with them, but I am very very doubtful of this. Possibly we might see a level 1 "pink sheet", but full NYSE listing???? I don't think so! I really haven't been too concerned by this drop. I'm long, and VERY confident of the upside (to $150 at least)...I did get a little concerned today though when TBR clearly dragged down the whole market (note that for the 1st time in several days, TBR did NOT underperform the index today)..in other words, sentiment has spilled over to the other stocks....AND even to Argentina and Mexico which were both off hard today. The argument here, and this DOES MAKE SOME SENSE, is that of concerns over a new meltdown in Asia. In particular, the doomsday scenario holds that with the Yen so weak right now, pressure is growing on China to devalue their currency. Were they to do this, the then Hong Kong peg would collapse without a doubt, and you could kiss bye-bye to Brazil. Don't believe this will happen, you understand, just putting forward the theory. I too am looking now for a sharp bounce, but gotta tell you feels like we may have one last lurch down 1st. Kind of silly, I know, but I think that Japan holds the key for Monday's open. If Nikkei is down more, then expect a further drop. If she's higher, then......pop! (Nikkei future closed up 1/2% in Chicago today....so a touch of promise!) Sorry for the long absence. Jeremy