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

To: Steve Fancy who wrote (7026)	8/21/1998 8:21:00 PM
From: Jerry A. Laska	Respond to of 22640

Brazil forex mkt sees huge daily net dollar outflow SAO PAULO, Aug 21 (Reuters) - Brazil's commercial foreign exchange contracts posted a preliminary daily net outflow of $900 million on Friday as global economic woes roiled the country's financial markets, dealers said. The huge one-day outflow was mainly due to dollar sales amid economic trouble in Russia, Venezuela and other emerging markets plus a sharp fall posted by the Sao Paulo stock exchange, dealers said. Expiring agricultural loans also added to the departure of the U.S. currency. Just on Tuesday, Brazil's commercial forex market had registered an extraordinary net outflow of $963 million due to expiring agricultural loans, known as ''63 Caipira''. Central Bank officials had assured investors then that the outflows were linked to an expected maturity of those loans. Approximately $4.0 billion worth in these loans were expected to come due this month, the bank had said. On Friday, the Central Bank's head of foreign reserve department told Reuters the country's $70 billion in dollar supplies put Brazil in a comfortable position to fend off growing unrest in world financial markets. But in a separate move, the bank sold one billion reais worth of special dollar-indexed notes in a move seen by dealers as the bank's bid to calm the market. The local currency real dropped 0.09 percent at 1.1750 to the dollar on Friday. The sale of the papers was seen by the market as an attempt to increase the offer of dollar-linked debt in the market amid fears of currency devaluations in some emerging market countries. biz.yahoo.com

To: Steve Fancy who wrote (7026)	8/21/1998 8:22:00 PM
From: Jerry A. Laska	Respond to of 22640

Brazil shrs brake big fall in late technical trade RIO DE JANEIRO, Aug 21 (Reuters) - Brazilian stocks recovered in a technical bounce at the close Friday after a spectacular 10 percent drop earlier that triggered a circuit breaker, traders said. The Bovespa (^BVSP - news) index of 58 leading shares closed down points at 7764 points after hitting an intraday low of 7191, its weakest since the week ending Jan. 10, 1997 when the index closed at 6998. Traders were uncertain if the recovery would stick next week as the market was still extremely skittish. ''It's really, really scary right now,'' one trader said. Worries that Russia would not be able to pull itself out of an economic mess that was threatening to slop over into Latin America triggered the nosedive at midday, traders said. Some said there was ''white-knight'' buying by the government's pension funds and the National Development Bank (BNDES) to protect the market, others said the bounce back at the close was due purely to technical reasons. Of main concern was the fate of Telebras (TELB4.SA) preferred shares which normally account for half the total volume of Brazil's stock markets. Despite last-minute buying, Telebras closed below 100 reais, seen as key support level. ''The government was definitely trying to protect Telebras at the end,'' another trader said. Telebras closed down 1.99 percent at 98.50 reais, representing a 28 percent loss of value from July 29 when it was privatized. Shares in the telecommunications network which is now actually a group of 12 companies trading as a block hit an intraday low of 92.50 reais. The other blue-chips, however, posted much bigger percentage losses. Petrobras preferred (PETR4.SA) dropped 5.59 percent to close at 169 reais, Eletrobras (ELET6.SA) fell 5.9 percent to 25.50 and Vale do Rio Doce (VALE5.SA) tumbled 6.83 percent to 16.50. Brazil's stock prices have been hammered over the past two weeks amid global market turbulence, erasing practically all the gains of the past two years. The Bovespa index has lost more than 2,000 points since the end of last year when it closed at 10,052 points. Traders said investors were fleeing emerging markets like Brazil because they were liquid and heading to safe havens like U.S. Treasuries. Volume at the moment was really low because no one is buying and prices have tumbled to such meager levels that no one is selling either, traders said. There was 733 million reais in volume traded Friday. Brazil's dollar-denominated C bonds, widely regarded as the emerging market benchmark, crashed down to a near year low, closing down 4.25 points at 55.75 percent. The real currency, however, held steady at 1.1750 to the dollar despite equity market volatility and dollar outflows. biz.yahoo.com

To: Steve Fancy who wrote (7026)	8/21/1998 8:24:00 PM
From: Jerry A. Laska	Respond to of 22640

Latam debt drops again, pressed by margin calls By Hugh Bronstein NEW YORK, Aug 21 (Reuters) - Latin America faced dearer borrowing costs Friday amid market speculation Venezuela might devalue its currency after the central bank announced that the bolivar would float more freely within existing currency bands. The market was also sorely pressured by bank demands for higher escrow deposits from investors in the wake of heavy losses in emerging market bonds over the last two weeks. ''The central bank statement implies it will allow the bolivar to crawl closer to the top of the band,'' said Siobhan Manning, a Latin American debt analyst at PaineWebber. ''This implies that foreign reserve losses may continue at a faster pace, which would mean a devaluation might come sooner than it would have otherwise.'' Manning said she did not expect a devaluation for six to eight weeks. The band is 7.5 percent below and above a central parity rate with a monthly crawl of 1.28 percent. The central parity rate at the end of August is 560 bolivars to the U.S. dollar, meaning the bolivar cannot get stronger than 518 or weaker than 602 bolivars. Other U.S. analysts also said an imminent devaluation was unlikely and added that Friday's sell-off was driven by huge liquidations for the purpose of raising money to meet margin calls. Banks often require investors to increase collateral on deposit to guard against increased risk in what is known as a margin call. Venezuela GLB18 bonds (VENGLB18=RR) were down 8-1/4 to bid 52-3/4, Brazil C bonds (BRAZILC=RR) were down 3-3/8 to bid 56-1/8 and Argentina PAR paper (ARGPAR=RR) was down 5-1/8 to bid 63-3/8. ''These prices overstate the risk of default that these countries have,'' said Desmond Lachman, managing director in emerging markets research at Salomon Smith Barney. ''But these technical factors can take the market even lower.'' This chapter of the emerging markets debt crisis began Monday when Russia announced a de facto devaluation of the rouble, sparking fears that Venezuela would follow suit, despite emphatic denials from the government. Russia's currency band system is similar to Venezuela's. Lachman said the recent swoon in Latin American debt resulted from a high amount of leverage in the market. Large investors often borrow money to buy more bonds than they otherwise could, to maximize profits. This, as the market witnessed this week, can also result in maximizing losses. In order to increase collateral to banks after losses sustained recently in the Russian debt markets, investors were compelled to sell other investments, Lachman said. He also said the bearishness in emerging debt had not yet run its course. ''But at some point, some aggressive investor is going to realize these prices bear no relationship to the fundamentals of these countries,'' Lachman said. ''They're going to say, 'If I take this bet and hold these bonds long enough, I'm going to make a bundle.''' Several analysts agreed that Venezuela, with about $14.0 billion in foreign currency reserves, can defend its currency for months without a devaluation. ''They have almost a full year's worth of import cover in terms of foreign currency reserves. A devaluation need not be imminent, but that's not what the markets are thinking,'' said Jorge Mariscal, Latin American strategist at Goldman, Sachs & Co. He agreed with Lachman that Venezuela was a sideshow in what was becoming a global emerging markets crisis. ''Venezuela in and of itself would not be an issue, but when you combine it with Russia's problem and Asia, which is always ready to blow, there is fear that we are approaching a situation where there are several infectious points active at once,'' Mariscal said. U.S. and European equity markets also took a beating Friday. The Dow Jones industrial Average was down nearly 3 percent early Friday afternoon, before recovering some ground to close about 1 percent lower on the day. ''Now that the contagion has spread to U.S. and European markets as well, there will be increased urgency for the U.S. Treasury and the International Monetary Fund to address the Russia situation next week,'' Mariscal said. ''If lead walls are not put around that radiation in Russia, there is a risk that things will get much worse before they get better.'' biz.yahoo.com

To: Steve Fancy who wrote (7026)	8/21/1998 8:27:00 PM
From: Jerry A. Laska	Respond to of 22640

Emerging mkt continues slide; Argentina leads pack By Apu Sikri NEW YORK, Aug 21 (Reuters) - As if on a ski slope that never ends, emerging market bonds continued to slide with Argentina leading the pack this time, traders said. Emerging market bond prices dropped anywhere from two points to 10 points, with Latin American bonds taking the worst hit, traders said. Argentina's global bonds due 2027 lost 8-1/4 points to end at 75 and its par bonds dropped 6-1/8 and were bid at 61-3/8 near the close. ''Argentina is catching up with the rest of the Latin American market,'' said Paul Dickson, sovereign bond strategist at Lehman Brothers Inc. Late Friday, both Argentina's par bonds and Mexico's par bonds were trading at a yield spread of 1200 basis points on a stripped basis, Dickson pointed out. Argentina's stock market has seen a correction of nearly 40 percent this year, Dickson pointed out, indicating some pressure on financial assets. As investors reevaluate the fundamentals of Latin American economies, currencies of major countries are coming under pressure. Mexico's peso ended at 9.72/9.78 per dollar. Speculation is rife in the financial markets that Venezuela will be forced to devalue its currency - the bolivar. With the fall Friday, this week will be seen as among the worst routs in emerging market debt in recent history, analysts said. The J.P. Morgan Emerging Markets Bond Index yield jumped to 1,071 basis points Friday, more than 300 basis points wider from last week. Next week, market attention will be squarely focused on Russia's debt restructuring, which will be announced Monday. The extent of recovery on that debt for foreign investors will determine broad market sentiment, traders said. Analysts in Moscow who have been talking to government officials there said that currency forwards won't be included in any restructuring. ''The forwards are private bank obligations. The government is focusing squarely on sovereign obligations,'' said an analyst with one of the major U.S. commercial banks. The exposure of U.S. money center banks to Russia as of March 31 was at $6.744 billion, according to Raphael Soifer, banking analyst at Brown Brothers Harriman & Co. In a conference call with analysts, a Chase Manhattan Bank official said its current exposure to Russia is about $500 million, a spokesman for the bank confirmed. biz.yahoo.com