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

To: Steve Fancy who wrote (7034)	8/22/1998 3:41:00 AM
From: Jerry A. Laska	Read Replies (3) \| Respond to of 22640

FOCUS-Global crisis darkens Brazil stocks outlook By Tracey Ober RIO DE JANEIRO, Aug 21 (Reuters) - Fears that the snowballing emerging markets crisis would soon infect Latin America caused weakening Brazilian stock prices to wilt further on Friday and traders said uncertainty would paralyse the tense market for the time being. Share prices plummeted 10 percent by midday to trigger a circuit breaker and stop trade. The Bovespa (^BVSP - news) index of 58 leading shares ended down a relatively tame 2.85 percent but the psychological damage was done and traders saw little hope for recovery next week. ''The market is going to be stuck,'' a trader at Banco Santander in Sao Paulo said. ''People who have money do not want to invest in the stock exchange because they are afraid and the people who hold the stocks do not want to sell because it's too cheap.'' In the past two weeks of market turbulence around the world, Brazilian stocks have lost all the gains of the past two years and traders are wondering where it will all end. ''Either people are going to scale down their return expectations and some locals will come in to buy or the market is going to crash once again,'' another local trader said. ''It's really, really scary right now.'' The Bovespa closed down 228 points at 7,764 points after hitting an intraday low of 7,191, its weakest point since early January 1997. It has lost more than 2,000 points since the end of last year when it closed above 10,000 points. Traders said investors were fleeing emerging markets in droves, heading to safe havens like U.S. Treasuries, and Brazil was getting slammed because it is still has relatively liquid blue-chips. ''There is an exit of investors from the emerging markets and the market with the greatest liquidity is Brazil,'' said Alvaro Augusto Vidigal, the former Sao Paulo stock exchange president. He, like many in the market, was uncertain how things would pan out next week, but was not particularly hopeful. ''It's difficult to say how the market will go. I don't see anything that would make it worse, but there is also nothing that gives much room for optimism.'' Volume was expected to remain paltry because no one was buying and prices have tumbled to such meagre levels that no one was selling either. There was 733 million reais in volume traded Friday. Brazil's dollar-denominated C bonds, widely regarded as the emerging market benchmark, crashed to a new year low, but the currency, the real, held fairly steady with the Central Bank selling dollars. The Finance Ministry also stepped in to reassure investors that Brazilian fundamentals were still holding firm and that, in fact, the economy was even stronger than when the Asian financial crisis first erupted last year. 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. Despite last-minute buying, Telebras closed below 100 reais, seen as a psychologically key support level. It had rumoured help from government buying and the other blue-chips posted much bigger percentage losses. biz.yahoo.com