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

To: djane who wrote (7286)	8/30/1998 9:51:00 PM
From: MGV	Read Replies (2) \| Respond to of 22640

(My read is that greed will return upon any of the following, among others: Japanese banking reform and tax relief, Russian debt restructuring, hint of strength in commodity prices, Cardoso re-election, etc., etc. - stay tuned.) Japanese reform is the most critical one because it is the one that goes the farthest to dealing with the currency risk in Brazil. IMO, The re-election of Cardoso should not be expected to have a significant impact on TBR in and of itself because it largely has been discounted into the price already. Of course, the reelection of Cardoso is critical to the Brazilian economy and by extension TBR. If you hear news of credible reform in Japan, you can be sure that someone will be going a little longer in TBR.

To: djane who wrote (7286)	8/31/1998 12:02:00 PM
From: djane	Respond to of 22640

Loyola: Crisis not to affect interest rate reduction -rpt Aug/31/98 at 10h42 am ET Sao Paulo, 31 - Former president of the Central Bank (BC) and currently an analyst at the Tendˆncias consultancy, Gustavo Loyola, said on Friday that the BC has even intensified the rate at which short-term interest rates have been reduced. During a teleconference conducted by the consultancy company, Loyola said the bank's decision to reduce the tax rate on fixed-yield funds capital gains to zero see related story, constitutes one more indication that the BC intends to continue with the gradual reduction of interest rates. However, Loyola believes the tax exemption will be temporary as it may favor arbitrage, as the domestic investor still has to pay a 20% tax rate on this type of investment. He affirmed that the bank is committed to defending its interest rate policy and added that the Tendˆncias consultancy forecasts the Basic Interest Rate (TBC) should be reduced to a figure between 18.50% and 19%, against the current 19.75% in the next Copom meeting on September 2. (By Josu‚ Leonel) Copyright c 1996 Agˆncia Estado. All Rights Reserved.

To: djane who wrote (7286)	8/31/1998 12:04:00 PM
From: djane	Respond to of 22640

Forex market posts a US$1.013bn deficit on Friday Aug/31/98 at 10h28 am ET Sao Paulo, 31 - Brazil's forex market posted a US$1.013bn deficit on Friday. The figure increased the month's accumulated negative result to US$7.300bn from US$6.285bn. During the session, financial inflow reached US$199m, well below outflow which stood at US$1.196bn. Reasons behind the outflow figure, are not only related to the expiration of 63 Caipira operations anymore, an analyst told Agˆncia Estado, but also to the performance of Brazilian stock exchanges. In the trade account, exports reached US$192m, also below imports which totaled US$208m. The floating dollar was negative at US$552m, boosting the accumulated negative balance to US$2.634bn from US$1.977bn. (By Adriana Carvalho) Financial Flow (US$M) Trade Flow (US$M) Net (US$M) Inflow Outflow Imports Exports 199.000 1,196.000 208.000 192.000 -1.013 Source: Central Bank Copyright c 1996 Agˆncia Estado. All Rights Reserved.

To: djane who wrote (7286)	8/31/1998 12:06:00 PM
From: djane	Respond to of 22640

Latam bond spreads show investors distinguish risk Monday August 31, 11:10 am Eastern Time By Axel Bugge BUENOS AIRES, Aug 31 (Reuters) - Latin American governments complaining that their markets are being hit indiscriminately by contagion from emerging market turmoil can take comfort in bond markets that show clear distinctions of country risk. Bond yields and spreads over U.S. Treasuries have soared across Latin America on the fallout from Russia's economic crisis, but the large variations suggest investors see the creditworthiness of countries very differently. As bond prices move inversely to yields, the latest rout in markets has meant investors are demanding higher returns on Latin American bonds to compensate for what they perceive as higher risks incurred by investing in emerging markets. Of the largest economies, Venezuela has come out as the biggest loser, suffering from recurring talk of a devaluation and the fear that Hugo Chavez, a former military coup leader who wants Venezuela to stop paying foreign debt, might win December's presidential election. Brazil's bonds have been the second hardest hit. Mexico and Argentina have seen their yields and spreads rise much less, creating two tiers in Latin America with those Mexico and Argentina on one side and Venezuela and Brazil on the other. ''There are some countries where country risk has risen much more than others,'' said Marcelo Romano, an economist at the Lopez Leon brokerage in Buenos Aires. Measured by the countries' respective 30-year global bonds, Venezuela's yields have more than doubled to 22.21 percent on Monday from about 11 percent at the end of May. Venezuela must now pay 16.91 percentage points more than the United States does on similar treasury bonds to attract investors. That spread is 11.30 percentage points wider than in May. ''Venezuela has been hurt more, stumbling on the recurrent rumors of a devaluation,'' said Hugo Diaz Lourenco, an analyst at Argentina's C&E consultancy. Brazil's yield has climbed to 17.35 percent now from 11.22 percent at the end of May and its spread has risen 6.3 percentage points to 11.99 points. Mexico's yield has risen to 13.03 percent from about 9.8 percent at the end of May, while its spread has risen by 3.3 percentage points to 7.61 points. Argentina's 30-year yield has risen to 13.74 percent from 10.5 percent and seen its spread increase 3.33 percentage points to 8.33 points. ''There is clearly some differentiation, shown for instance by the fact that some countries like Argentina have much more healthy fundamentals,'' said an analyst at a foreign bank in Buenos Aires, who asked not to be named. While analysts say these different levels of spread increases are a gauge of risk factors like countries' ability to pay off debt, currency and political stability, they also point out that a lot of the sell-off is due to funds covering losses elsewhere, like in Russia. That kind of selling often does not take into account countries' economic fundamentals. And, analysts warn that if financial losses pile up elsewhere around the globe, and if funds are forced to make more sales, the fundamental differences will become less important. That process is exacerbated as the larger the global financial market losses, the more volatility there is in markets and less important are relative economic fundamentals. ''The longer the crisis lasts, the less differentiation there will be be,'' said Diaz Lourenco. That could mean that those countries in Latin America that have fared relatively well could still fall disproportionately more. ''There are now differences but when the differences become too large, the others could fall,'' said a fund manager, who asked not to be named. Related News Categories: international, IPOs, US Market News Help Copyright c 1998 Reuters Limited. All rights reserved.

To: djane who wrote (7286)	8/31/1998 12:09:00 PM
From: djane	Respond to of 22640

Brazil stocks seen mixed on Russia, local recovery Monday August 31, 9:31 am Eastern Time \000 RIO DE JANEIRO, Aug 31 (Reuters) - Brazilian stocks were seen mixed on Monday in volatile trade amid concerns about the financial and political turbulence in Russia, but traders said a key market factor would be a central bank decision on interest rates expected this week. ''We've got to keep an eye on Russia, but there could be some buyers here. It's still pretty volatile,'' one trader said. ''The market tried to recover Friday and that could go on.'' On Friday, Sao Paulo's Bovespa (^BVSP - news) index of the 58 most traded stocks ended 1.96 percent higher at 6,746 points after surging up early on and swinging to slight losses later. Investors, who have been fleeing Brazil on fears Russia's crisis would spill over into Latin America's biggest economy, were further unsettled by warnings from top Russian officials that the country was heading into political and financial chaos. The Bovespa plummeted 37 percent in August as investors sought safer instruments such as U.S. Treasuries. But dealers said they could not yet tell from international markets what direction the local one would take on Monday. Some Asian bourses were up, while some in Europe were down. ''The market could improve a bit, but truth is, it's going to continue being pretty volatile,'' another trader said. -- POSSIBLE LOST DATA -- \000 Dealers said there could be a boost from a monetary policy committee meeting on Wednesday where there could be a slight reduction in the current annual rate of 19.75 percent. Strengthening this perception were comments by President Fernando Henrique Cardoso that the rates would not be raised. Trade in the benchmark leading share Telebras was expected to dominate activity. Bluechip activity Friday: Telebras (TELB4.SA) up 3.66 pct at 87.70 reais Petrobras (PETR4.SA) down 0.79 pct at 125.00 reais Eletrobras (ELET6.SA) up 0.53 pct at 19.10 reais Vale do Rio Doce (VALE5.SA) up 3.83 pct at 16.00 reais Bovespa: * Friday: up 1.96 pct at 6,746 points * Week: down 13.1 pct * Month: down 36.9 pct * Year-to-date: down 33.8 pct SELIC (open): 2.07 pct Dollar/Real (open): 1.1760 per dollar YESTERDAY'S STORIES (\SUR) ***** SPOT REAL QUOTES (BRBY) BOVESPA STOCK INDEX (^BVSP - news) ELECTRICAL ENERGY INDEX (^IEE - news) BRAZILIAN ADR PRICES (BR/ADR) BRAZILIAN BRADY BOND PRICES (2LDO) BRAZILIAN DOLLAR FLOW HISTORY (BRFLOW) More Quotes and News: ^IEE - news BRSP BOVESPA IND (^BVSP - news) Related News Categories: international, US Market News Help Copyright c 1998 Reuters Limited. All rights reserved.

To: djane who wrote (7286)	8/31/1998 12:19:00 PM
From: djane	Respond to of 22640

** Cardoso discards forex or interest rates changes [No devaluation] Aug/31/98 at 08h56 am ET agestado.com Sao Paulo, 31 - President Fernando Henrique Cardoso confirmed yesterday his economic team's declarations and rejected the possibility of devaluating the real or raising interest rates, as a result of the current international financial crisis. "When the currency is devaluated, people have to pay for it", he said. Although banks are apparently confident in the government's intention to keep reducing interest rates, the institutions have taken precautions against the eventual effects of the Russian and Asian crises in Brazil. Banco do Brasil (BB), for instance, reduced the term of its leasing operations to 24 months from 36 months and will no longer release pre-fixed tax rates financing. Auto makers banks are also studying changes. (O Estado de S. Paulo/ Folha de S.Paulo/ Jornal do Brasil/ O Globo. Edited by Sergio Caldas) Copyright c 1996 Agˆncia Estado. All Rights Reserved.

To: djane who wrote (7286)	8/31/1998 12:30:00 PM
From: djane	Respond to of 22640

WSJ. Brazilian Officials Defend the Real As Dollars Begin a Steady Exit [Fairly positive article] August 31, 1998 By PETER FRITSCH Staff Reporter of THE WALL STREET JOURNAL SAO PAULO, Brazil -- Though Brazil's currency has so far withstood the pressures that have rocked others, officials here are adopting a more defensive position as dollars do a slow but steady samba toward the exits. Central bank figures show a hemorrhage of $8.3 billion in August (through Thursday), dropping international reserves to a still-comfortable level of $67 billion, economists say. And the bleeding would have been worse if not for foreigners making down payments on stakes purchased in telecommunications giant Telecomunicacoes Brasileiras SA at the end of July. The numbers reflect a sharp turnaround for the world's ninth-largest economy, which saw a net dollar inflow of $2.3 billion in July. In reaction, Brazil's government adopted a half-dozen measures last week to attract the kind of short-term portfolio capital it has tried to discourage. For example, the country will do away with the 15% income tax foreigners now pay on fixed-income instruments like government paper. That measure will take effect Tuesday and remain valid for six months. Economists say such moves will at best stem dollar outflows. "But the overall negative sentiment toward emerging markets won't be changed much by a few extra percentage points of return," said a fund manager for Banco Bradesco SA. Minor Tinkering Such minor policy tinkering partly reflects the fact that Brazil's monetary officials Monday have less room to maneuver than they did when the first dominoes began to fall in Asia in October. Jacking up interest rates and throwing the economy into a deep freeze to defend the real would be especially difficult with national elections set for Oct. 4. Also, the government's shift to floating-rate domestic debt in the wake of the Asian crisis means a tightening would have an extremely negative impact on Brazil's already weak fiscal accounts. J.P. Morgan & Co. economist Marcelo Carvalho figures a repeat of October's doubling of rates could result in a devastating fiscal hit on the order of 2% of gross domestic product. Still, central bankers say this would be preferable to devaluation and a return to inflation. They have said they are willing to spend an additional $10 billion to $15 billion to defend the currency and aren't afraid to lift rates thereafter to avoid devaluation. "Remember that the president has said that if he has to choose between winning the election and defending Brazil in a crisis, he would prefer to defend the country," said central bank President Gustavo Franco in an interview. The administration appears to have slack with voters. A survey released Friday by pollster Ibope and media concern Globo SA shows President Fernando Henrique Cardoso with 46% of the prospective vote against a combined 32% for his rivals. That would give Mr. Cardoso an easy first-round victory. Were balloting to go to a second round, the poll showed, Mr. Cardoso would crush chief contender Luiz Inacio Lula da Silva 58% to 29%. Unemployment Rate Rises Also Friday, the Brazilian Institute for Geography and Statistics said the country's unemployment rate inched up to 8.0% in July from 7.9% in June. The institute said the average unemployment rate in the first seven months of the year rose to 7.8%, two percentage points above the 5.8% rate in the 1997 period. Looking forward, Brazil's near-term currency pressures don't appear to be as bad as the latest figures signal. Unlike Mexico in late 1994, Brazil doesn't have a large outstanding stock of short-term, dollar-denominated debt that could go running for cover in a speculative attack on the currency. Also, the amount of foreign participation in Brazil's markets is still fairly limited. "Overseas investors' holdings in government bonds are negligible" in the overall pool of such paper, said Mr. Franco. And foreigners have already unwound their local stock positions sharply, analysts say, from levels of $25 billion at the end of June. Economists say the latest dollar outflow figures may be slightly misleading. They note that $3 billion leaving this month corresponds to expected retirements of short-term paper bought earlier this year in an interest-rate arbitrage game. Perhaps the biggest friend in Brazil's corner are foreign multinationals that keep building their businesses here to serve Brazil's 160 million consumers. Foreign direct investment of $18 billion last year is likely to grow to between $20 billion and $25 billion this year, Mr. Franco said. "We're approaching a situation where most of our current-account deficit [now about $30 billion] is being funded by foreign direct investment," he said. The current account is the broadest measure of trade flows. Michael Shoemaker, head of Compaq Computer Corp.'s Brazilian subsidiary, said for instance that the market turmoil has had no effect on company plans to spend $40 million here this year. Purging Their Portfolios Brazil's banks, meantime, have purged their portfolios of the kind of bad bets that cost them dearly in October. And as Mr. Franco points out, banks keep a large 55 billion reals ($47 billion) on reserve with the central bank out of outstanding credit in the commercial banking system of about 250 billion reals. Coming weeks will be crucial. Beyond the elections, the government faces a maturity spike in public debt: approximately $47 billion will expire in October -- double the usual monthly amount -- out of a total domestic debt stock of roughly $255 billion. "I do not see any problem on the horizon in this area," Mr. Franco said. Meantime, markets remain nervous. Stocks and Brazilian Brady bonds have both lost more than a third of their value this month. After a 10% drop Thursday, the Sao Paulo Stock Exchange's Bovespa Index rose 1.96% Friday to 6746 with the help of buying from the state development bank. The spot dollar settled a slim 0.09% stronger at 1.1761 reals. Brazil's currency trades within a band established by the central bank, which allows for a nominal 7% devaluation a year. Return to top of page \| Format for printing Copyright c 1998 Dow Jones & Company, Inc. All Rights Reserved.

To: djane who wrote (7286)	8/31/1998 12:56:00 PM
From: djane	Read Replies (2) \| Respond to of 22640

Brazilian shares tumble over 2 percent by midday Monday August 31, 12:05 pm Eastern Time RIO DE JANEIRO, Aug 31 (Reuters) - Brazilian shares tumbled more than 2 percent at midday Monday tracking foreign markets unhinged by further political and economic uncertainty in Russia, traders said. Trading volume was very thin with few takers as investors stayed away from emerging markets in general, but traders did not expect Brazil's shares to drop more than 3 percent. There was speculation that the government was buying the leading share Telebras (TELB4.SA) to help support the bourse. The Bovespa (^BVSP - news) index of the 58 most traded shares fell 2.36 percent to 6,587 points at 1132 local/1432 GMT. ''Nothing is happening here, there are just no inflows to emerging markets,'' a trader at Bozano, Simonsen bank said. Brazilian share prices have plummeted nearly 40 percent in August, wiping out the gains of the past two years, as investors pulled out of emerging markets on fears the crisis in Russia would spread. The Bovespa recovered a bit late Friday and traders had expected that it could recoup more if things remained quiet overseas. But European markets led a trend downward Monday after a top Kremlin aide warned that Russia was heading toward a political revolution. Brazil's C-bonds, widely regarded as an emerging market benchmark, were off 0.6 points at 52.1 percent at midday. For economists, the main concern is whether the country will be able to roll over its large public debt in the short term. Telebras (TELB4.SA) shares were falling 1.94 percent to 86.00 at midday while bluechips Petrobras (PETR4.SA) were down 4.0 percent to 120.00 reais and Eletrobras (ELET6.SA) was off 6.23 percent at 17.91 reais. Mining giant Vale do Rio Doce (VALE5.SA) was down 0.69 percent at 15.89. More Quotes and News: BRSP BOVESPA IND (^BVSP - news) Related News Categories: international, US Market News Help Copyright c 1998 Reuters Limited. All rights reserved.