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

To: DMaA who wrote (7804)	9/10/1998 9:32:00 PM
From: Anthony L. Califano	Read Replies (1) \| Respond to of 22640

I don't think there is much time to buy TBR intact (as one company). With respect to the oil stock rise, although I don't fully understand the underlying reasons, I think CNBC gave the reason that oil stocks are generally a safe haven in times of political (U.S., I guess) instability. I guess oil stocks are somewhat defensive.

To: DMaA who wrote (7804)	9/10/1998 9:33:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shares to restart trading at 2026 GMT Reuters, Thursday, September 10, 1998 at 16:23 SAO PAULO, Sept 10 (Reuters) - Brazilian shares are poised to resume trading at 1726 local/2026 GMT on Thursday when the Sao Paulo stock exchange lifts the second market circuit breaker set off today, the bourse said. The trading will run for another 30 minutes then, extending the normal trading hours due to the earlier suspension. The bourse usually closes at 1700 local/2000 GMT. The 57-share Bovespa index (INDEX:$BVSP.X) was down 15.09 percent at 4,802 points when trading was halted. Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:36:00 PM
From: Steve Fancy	Respond to of 22640

Brazil forex outflows higher than $2 bln-traders Reuters, Thursday, September 10, 1998 at 17:16 SAO PAULO, Sept 10 (Reuters) - Brazil lost more than $2 billion in net outflows from its foreign exchange markets on Thursday as investors pulled out of the country on concerns over its economic outlook, traders said. Brazil's currency closed steady at 1.1790 reais to the dollar in the commercial market after the Central Bank intervened selling dollars in a bid to stabilize the foreign exchange rate, according to dealers. "The market doesn't know how long the government will be able to sustain this situation," one trader said. Between $2 billion and $3 billion were seen fleeing through the commercial and fluctuating forex markets after the government announced a widening budget deficit and quickly draining reserves. The news spooked already nervous investors who yanked their cash out of the country and sent the benchmark Bovespa stock exchange plummeting more than 15 percent in late afternoon trade. At 1730 local/2030 gmt, the Central Bank had already registered outflows of $452 million from the commercial forex market and traders said the combined net outflows from the floating and commercial markets was at $1.012 billion. In the floating rate market, the currency closed at 1.1820 reais against the dollar, traders said. Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:39:00 PM
From: Steve Fancy	Respond to of 22640

Brazil will raise rates again if needed Reuters, Thursday, September 10, 1998 at 17:44 Brazil has seen a tidal wave of dollars flow out of the country in recent weeks as investors rattled by the economic crisis in Russia pull out of emerging markets. More than $2 billion was seen fleeing the country from the foreign exchange market Thursday as the dollar flight for the day topped the $1.142 billion drain registered Wednesday, foreign exchange traders said. Local investors were seen leaving the country to invest in more attractive foreign instruments such as Brady bonds, which currently offer high yields and have the added advantage of being dollar-denominated, Lopes said. The Central Bank would consider raising rates in order to make this option less attractive, he added. Although raising rates would inflate Brazil's debt servicing costs, fueling its already high nominal budget deficit, the cost would be only a temporary evil, Lopes said. "Monetary policy cannot be constrained by fiscal considerations," he said, pointing out that Brazil's net public sector debt was still relatively low compared to other countries at 38.1 percent of gross domestic product (GDP) in June. Brazil posted a nominal budget deficit of 7.27 percent of GDP between January and June, up sharply from 6.46 percent of GDP in the January-May period. The Central Bank forecast the nominal budget gap would end 1998 at 7.3 percent of GDP, provided rates remained stable at 29.75 percent. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:41:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shares end down 15.82 pct on panic selling Reuters, Thursday, September 10, 1998 at 18:21 SAO PAULO, Sept 10 (Reuters) - Brazilian shares were slammed across the board on Thursday as panicked investors, worried about the country's economic outlook and the government's ability to fend off a crisis, pulled out of the market. The 57-share Bovespa index (INDEX:$BVSP.X) ended down 15.82 percent -- the biggest drop posted since Oct. 20 1987 -- after setting off the market's circuit breaker twice, halting trade for a total of 90 minutes. "It was like panic selling, and a big part of it came from foreigners, worried about Brazil," said one local trader. "A mass of dollars seemed to have left Brazil again today." Forex dealers estimated more than $2 billion left the country on Thursday through the commercial and floating exchange markets. This adds to an accumulated net outflow of over $8.7 billion so far this month by Wednesday. Stocks worth $715 million changed hands on Thursday. Investors were haunted by the widespread belief that the capital flight from Brazil's financial markets would not stop in the immediate future, brokers said. The Central Bank had effectively raised interest rates to 29.75 percent and introduced a new currency hedging instrument in the forex market, but they failed to lift sentiment. After the close on Thursday, the stock market said the Bovespa index had lost 53 percent so far this year. Leading the blue-chip losers were Telebras preferred (SAO:TELB4), down 17.56 percent at 58.20 reais and Petrobras preferred (SAO:PETR4), down 16.95 percent at 98 reais. Eletrobras preferred B (SAO:ELET6) lost 12.22 percent at 15.81 reais, while Vale do Rio Doce preferred (SAO:VALE5) skidded 2.73 percent at 14.98 reais. noriko.yamaguchi@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:44:00 PM
From: Steve Fancy	Respond to of 22640

U.S. Treasury expresses support for troubled Latam Reuters, Thursday, September 10, 1998 at 18:30 WASHINGTON, Sept 10 (Reuters) - The U.S. Treasury Department expressed support for Latin American economies on Thursday, as investors bailed out of the region and markets there took a hammering. "Senior Treasury officials have been in close contact with their counterparts in Brazil and other Latin American countries today," a Treasury official said. "These countries have made great progress in economic reform in recent years, and it is very much in our interest to be supportive of the reform efforts of these nations, which mean so much to our economy," the official added. The Brazilian Bovespa (INDEX:$BVSP.X) index closed 15.8 percent lower on Thursday, its largest one-day drop in 11 years. The plunge caught other regional markets in its tail wind, dragging bourses down from Mexico City to Buenos Aires. Latin American currencies and bonds also reeled from the turmoil. Mexico's peso closed at a record low of 10.52/10.55 to the U.S. dollar even after the central bank intervened three times in efforts to shore it up. 898-8383, washington.economic.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:50:00 PM
From: Steve Fancy	Respond to of 22640

FOCUS-Brazil budget gap deepens, adds to headaches Reuters, Thursday, September 10, 1998 at 18:44 By Tracey Ober RIO DE JANEIRO, Sept 10 (Reuters) - Brazil posted a gaping budget shortfall Thursday, an unexpected headache that only increased pressure on the government to take drastic moves. The already towering nominal public sector deficit rose to 7.27 percent of gross domestic product in the first half of the year, up nearly 0.8 percentage point from a revised 6.46 percent in the first five months, the Central Bank said. Brazil's net public sector debt rose to 38.1 percent of GDP as of June. "The numbers are pretty bad and I think foreign investors look closely at that figure, which could end up having a negative effect on capital flows," Elisa Pessoa, chief economist at the local brokerage Fonte Cindam. Dollars were flying out of the country at a rate of about $1 billion a day as the government's attempts to dam the flow failed to impress rattled investors. The nominal deficit, also known as the public sector borrowing requirement, covers local, state and federal government expenditures. It is the most closely watched indicator of Brazil's fiscal health. Economists say the deteriorating budget account, which had a shortfall of 3.85 percent of GDP in the first half of 1997, makes the local currency, the real, vulnerable to speculative attacks. There is also increasing alarm at the size of Brazil's short-term debt, which will be difficult to roll over in the current crisis atmosphere of the world's financial markets. "The government already adopted measures to reduce the deficit, but the bill on interest is still very high and ends up interfering in the deficit, and that's worrisome," Marcelo Allain, chief economist at BMC bank, said. The government of President Fernando Henrique Cardoso, facing elections in less than a month, has announced a string of measures including four billion reais ($3.39 billion) in emergency budget cuts. The Central Bank, which had been steadily lowering interest rates after nearly doubling them during last year's crisis in Asia, recently hiked short-term rates and has been selling dollars on the foreign exchange markets to defend the real. But confidence in Brazil has been eroding rapidly -- stock prices plummeted Thursday, triggering a trading circuit breaker -- and cries for more government action are starting to get louder. Most analysts expect the government will still wait to take any more politically sensitive steps until after the elections, and there is some feeling that the measures already announced may work. "I think that if the announced four-billion-real budget cut is really carried out and interest rates stay at the same level for a short period, the deficit could be turned around," Camila Faria Lima, economist at Banco Santander, said. She said it was the sharp worsening of Brazil's primary account, which does not include interest payments on government debt, that had raised eyebrows and was making analysts rethink estimates on the size of the nominal deficit. Most had estimated that it would end the year at about 7 percent of GDP. The primary budget account posted a smaller surplus of 0.12 percent of GDP in the January-to-June period, versus 0.91 percent for January to May. "The result is certainly worse than I expected," Lima said. "The expectation now is that the government will take measures to reduce that deficit. I think we could see more measures after October 4 elections." Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:53:00 PM
From: Steve Fancy	Respond to of 22640

FOCUS-Brazil Cenbank says big budget gap to settle Reuters, Thursday, September 10, 1998 at 19:11 By Joelle Diderich BRASILIA, Sept 10 (Reuters) - Brazil's budget deficit rose sharply in June but should stay stable at about 7.3 percent of gross domestic product in 1998, thanks to recently announced spending cuts, a senior Central Bank official said Thursday. "The projection for 1998 is close to 7.3 percent" as long as already high local interest rates do not rise further, Central Bank monetary policy director Francisco Lopes told reporters. The Central Bank reported Thursday a nominal budget gap of 7.27 percent of GDP in the January-June period, a big leap from a revised 6.46 percent of GDP gap between January and May. The bad news came just as local markets were slumping on fears of a dollar flight. "Practically all this worsening was due to a deterioration in the federal government's accounts," Lopes said. He said higher spending on the federal payroll and lower tax receipts in June appeared to be to blame. The nominal budget deficit, also known as the public sector borrowing requirement, covers local, state and federal government expenditures and is a key indicator of Brazil's fiscal health. In 1997, Brazil posted a budget deficit of 6.1 percent of GDP. Lopes said most of the increase was due to higher debt costs. Economists say Brazil's high nominal budget gap -- which includes the nominal cost of interest payments on government debt -- makes the country dependent on volatile foreign capital and the currency vulnerable to speculative attack. Lopes noted that Tuesday's announcement of four billion reais ($3.42 billion) in cuts to federal government spending this year should help offset a rise in debt servicing costs. Last Friday, the Central Bank effectively raised its prime lending rate to banks to 29.75 percent, up from 19 percent. The move, aimed at stemming outflows of dollars, would cost the government an extra two billion reais a month in higher debt servicing costs, Lopes said. Brazil needs to maintain a healthy pile of cash reserves to defend the real currency -- widely considered overvalued by between 10 percent and 30 percent -- against speculative attack. Reserves have plummeted to $55 billion, down more than $12 billion in September so far. Assuming rates remained stable until the end of the year, Brazil would end 1998 with an average interest rate of 26.5 percent over the year, sharply higher than the 19 percent average it had been aiming for, Lopes said. The cumulative impact of extra interest payments linked to external crises -- first a doubling in interest rates last October at the height of the Asian economic crisis, then last week's rate hike -- was 1.9 percent of GDP, he added. Lopes noted the nominal budget gap in the 12 months to June was higher than the 7.27 percent of GDP in the first half of 1998 but it probably stood below 8 percent of GDP. The Central Bank forecast the primary budget -- which does not include debt costs -- would end 1998 almost in equilibrium at 0.03 percent of GDP, but only as long as the federal government stuck to its new pledge to cut four billion reais this year. The primary budget account posted a surplus of 0.12 percent of GDP between January and June, down from a surplus of 0.91 percent of GDP in the January-May period. Lopes predicted the nominal gap could fall below 5 percent of GDP in 1999 provided the global financial crisis abated, allowing Brazil to lower interest rates again and the government met its target of posting a 1 percent of GDP primary budget surplus. "There is a great possibility the nominal budget could fall below 5 percent of GDP," Lopes said. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:54:00 PM
From: Steve Fancy	Respond to of 22640

Ecuador asks Brazil for advise on telecom sale Reuters, Thursday, September 10, 1998 at 20:38 QUITO, Sept 10 (Reuters) - Ecuador's President Jamil Mahuad said Thursday he has asked Brazil for advice on privatizing two state telephone companies, after two previous failed attempts. Mahuad told journalists he had sought Brazil's advice after its succesfull privatization of its telephone system Telebras (NYSE:TBR), which raised $19 billion in July. "I asked President (Fernando Henrique) Cardoso if the Brazilian government could advise us and he accepted," he said. "After the successful sale of the Brazilian company I think they have a lot of know-how which Ecuador can benefit from." The president also said the country would wait out the current global financial market crisis before carrying out the privatization, saying "we have to do this well because it has to be the symbol of the relaunch of the country in this field." Mahuad's government took office in August. Plans to privatize parts of telephone companies Andinatel and Pacifictel were suspended last November and again in April due to lack of buyer interest. quito.newsroom@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 9:56:00 PM
From: Steve Fancy	Respond to of 22640

Brazil's Malan to hold news conference Reuters, Thursday, September 10, 1998 at 21:22 BRASILIA, Sept 10 (Reuters) - Brazilian Finance Minister Pedro Malan was due to hold a news conference Thursday evening, a ministry spokeswoman said. "He's going to talk about what's going on in the world and in the markets," the spokeswoman said. Share prices on the Sao Paulo stock exchange plunged nearly 16 percent Thursday and foreign exchange traders said more than $2 billion flooded out of forex markets amid Brazil's biggest financial crisis in recent years. Malan said in a radio interview earlier in the day that Brazil would not alter its foreign exchange policy and that the turbulence in local markets was backlash from volatility elsewhere. william.schomberg@reuters.com)) Copyright 1998, Reuters News Service

To: DMaA who wrote (7804)	9/10/1998 10:01:00 PM
From: Steve Fancy	Respond to of 22640

Sr Tsy Offl: In Contact With Brazil, Latin America Today Dow Jones Newswires WASHINGTON -- A senior Treasury official said late Thursday Brazil and other Latin American countries have made progress in reforming their economies, despite the sharp drop in some regional stock markets that may have spooked investors. "Senior Treasury officials have been in close contact with our counterparts in Brazil and other Latin American countries today," the official said. "These countries have made great progress in economic reform in recent years and it is very much in our interest to be supportive of the reform efforts of these nations which mean so much to our economy," the official said. Stock markets in some Latin America countries fell sharply Thursday, following the Dow Jones Industrial Average's plunge. Brazil's Bovespa stock index in particular saw drop of 15.8% Friday. -By Jonathan Nicholson; 202-862-9255 (END) Dow Jones Newswires 10-09-98 2229GMT (corrected 7:25 pm edt)

To: DMaA who wrote (7804)	9/10/1998 10:03:00 PM
From: Steve Fancy	Respond to of 22640

Brady Bonds End Lower As DJIA, Brazil Spook Investors Dow Jones Newswires NEW YORK -- Brady bonds are ending sharply weaker Thursday as Brazilian beleaguered economy and tumbling U.S. stocks drove investors away from emerging markets. The Dow Jones Industrial Average closed about 249 points lower to 7615. "All Latin American equities got hammered after the (Brazilian stock index) Bovespa crashed a hefty 15% today," a trader said. "People are panicking as they sell stocks to buy dollars," he added. Brazilian stocks plunged 15% Thursday, activating the circuit breaker for the second time in the session. Brazil's C-bonds lost 4 1/2 to 52 3/8 bid, while the Pars dropped 5 to 49 1/2 bid. Given the Brazilian troubled economy, the likelihood of a real devaluation in the near future is increasingly taking shape among investors, dealers said. "Brazil is in tight spot and may devalue its currency because of the large amount of maturing short-term debt linked to dollars," a trader noted. "What Brazil needs to do is to create a two-way flow in the market because people are moving their money out and Brazil is getting murdered by it." In Russia, although the political crisis seemed to have eased - after President Boris Yeltsin named Yevgeny Primakov as his candidate for prime minister - investors remain skeptical over the country's economic recovery. "At least Russia will have a government now, but the issue here is what the Duma will do and what it needs to do in order to get the financial aid from the IMF," a trader noted. Russian Principals and the Eurobonds maturing in 2007 closed unchanged at 9 1/4 bid and 22 bid, respectively. Among Latin American bonds, Argentine Pars lost 3 1/2 to 59 3/4 bid, while the Global bonds maturing in 2027 tumbled 7 to 63 1/2 bid. Mexican Pars gave up 2 1/2 to 69 1/2 bid, and the UMSs due in 2026 fell 6 1/4 to 82 bid. -By Enza Tedesco; 201-9382203; enza.tedesco@cor.dowjones.com

To: DMaA who wrote (7804)	9/10/1998 10:04:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

WRAP: Brazil Stocks Plunge, Rates Soar; Govt Action Awaited By GERALDO SAMOR Dow Jones Newswires RIO DE JANEIRO -- For Brazil's financial markets, every day of the recent turmoil has been a day of reckoning - and Thursday's session only seemed to bring the country closer to the abyss. Stocks plunged from the opening bell and triggered two circuit breakers in the Sao Paulo Stock Exchange - Latin America's largest - as the leading Bovespa index shed 15% in late trading. Meanwhile, interest rate futures soared. In Sao Paulo's Commodities & Futures Exchange, or BM&F, annual rates on the November contract for one-day CDs shot up to an intraday high of 48.04% before retreating to 43.20% in late trading. At Wednesday's close, the projected annual rate was at 34.08%. Dollar futures also plowed ahead. The October contract gained as much as 0.17%, valuing the dollar for delivery on Sept. 30 at BRL1.1878. In late trading, though, the dollar gave up almost all those gains, inching up a mild 0.01% to BRL1.1859. Some traders think the Central Bank may boost overnight lending rates to defend the currency. The monetary authority currently lends to banks at its assistance rate, known as TBan, of 29.75%. Traders say the Central Bank may either stop lending at that rate or charge higher rates. "It's going to depend on which rate they want to boost, but at this point this is not a matter of interest rates anymore, it's a matter of credibility," the trader said. Indeed, despite the government's firm commitments to defend its economic program, credibility continues to ebb a week after Moody's Investor Services questioned Brazil's fundamentals and downgraded its debt. On Thursday, two other agencies ganged up on the country. Standard & Poor's revised to "negative" from "stable" the rating outlook on Brazil's long-term unsecured foreign currency debt and its long- and short-term real-denominated debt. But, unlike Moody's, S&P's reaffirmed its actual ratings for Brazilian debt. Hours earlier, Duff & Phelps Credit Rating Co. had also lowered its outlook for Brazil. Credibility is what Brazil lost when it failed to contain its public deficit over the past four years, analysts say. The most recent figures of that policy flop came out Thursday. Brazil's nominal public sector deficit climbed to 7.3% of gross domestic product in the first half of 1998 from 6.5% in the first five months of the year. The public sector debt jumped to 38.1% of GDP in June from 36.9% in May, Central Bank data showed. On Tuesday, the government announced it was cutting BRL4 billion from this year's expenditures and would announce a three-year deficit-reduction plan by Nov. 15. "I don't know whether the government understands how grave the situation is," said one Brazilian banker working for a Wall Street investment firm. Finance Minister Pedro Malan swears he does. Malan, who appears puzzled at the markets' dismal reaction to Tuesday's measures, took to the airwaves Thursday, telling a news radio show that the market's turbulence derives from "collective irrationality" and that "there won't be any kind of change in the government's policy in relation to the exchange rate." To judge from the markets' behavior, however, the government will have to take further action to halt the escalation of bad sentiment. "This is an extremely delicate moment and it requires energetic measures," the banker said. "If the government doesn't take these measures now it will have to take them later with $15 billion less in reserves." He said the measures mean steeper and more specific budget cuts as well as a boost in government revenues. "What they did was too little too late," he said. And holding up the fort of currency stability is costing a lot. A Central Bank director said the country's reserves fell to $55 billion Wednesday from $70 billion at the end of July. -By Geraldo Samor; 55-21-580-9394; gsamor@ap.org