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

To: Steve Fancy who wrote (9612)	11/11/1998 6:09:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shrs end off 3 pct on rates, political woes Reuters, Wednesday, November 11, 1998 at 15:36 SAO PAULO, Nov 11 (Reuters) - Brazilian shares retreated for a second day Wednesday on concern that political obstacles could slow the passage of austerity measures and a cut in interest rates, traders said. "The markets aren't expecting as big a cut in interest rates tonight," said Carlos Hokama, a fund manager at Banco Credibanco in Sao Paulo. "For foreign investors the yellow light has gone up and caution is on the rise." Sao Paulo's key Bovespa index (INDEX:$BVSP.X) closed off 2.97 percent at 7,763 points. The Bovespa erased early gains on news that Congress put off finalizing a pension reform document. Investors worry that any signs of receding support for President Fernando Henrique Cardoso's fiscal tightening plan could slow cuts in interest rates and make Brazil more vulnerable to financial turmoil in the future. The Central Bank's interest rate committee meets Wednesday night to set benchmark interest rates. While markets expect a cut in the target ceiling rate, currently at 49.75 percent, their expectations were lowered by recent political bumps. Among blue-chip stocks, Eletrobras preferred (SAO:ELET6) tumbled 6.45 percent to 29 reais while Telebras preferred receipts (SAO:RCTB4O) slipped 3.76 percent to 97.20 reais. A handful of smaller stocks, however, were still playing catch-up to the Bovespa's stellar rise of more than 60 percent over the last two months, led by the first tier stocks. Cesp preferred (SAO:CESP4) surged 6.78 percent to 25.20 reais. Shares worth 611.56 million reais traded hands Wednesday. Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9612)	11/11/1998 6:11:00 PM
From: Steve Fancy	Respond to of 22640

Not just an IMF mirage, Brazil forex risk fading Reuters, Wednesday, November 11, 1998 at 17:44 By Joelle Diderich BRASILIA, Nov 11 (Reuters) - With an IMF lifeline almost within reach, Brazil's currency, the real, appears less in need of one than it has in a while. Once the most likely candidate for a Mexico-style currency implosion, the real has been depreciating quietly and swiftly, for reasons having little to do with the upcoming International Monetary Fund-led credit line. Brazil's real was estimated to be dangerously bloated by as much as 30 percent. And the upcoming IMF balm coupled with Brazil's tough fiscal tonic have fostered investor confidence and clearly eased pressure for a large devaluation. But falling consumer prices and a weakening dollar have been serendipitously furthering Brazil's controlled devaluation and taking some of the froth off the currency. "I would think that the majority's opinion is that (the real) is improving as we speak as inflation is falling," said Siobhan Manning, Latin American debt strategist at PaineWebber in New York. "I think it would be (overvalued) around the 10-15 percent range just based on deflation," she added. The real was sandbagged after Russia devalued in August, triggering massive capital flight in emerging market nations. Brazil went through around $30 billion of its foreign currency reserves and jacked up interest rates to defend its currency from a speculative blitzkrieg. But it was also quietly getting some mileage out of Brazil's lower prices. The Central Bank devalues the real by 7.5 percent to 8 percent a year, but generally inflation eats into that reduction. With forecasts of zero inflation or even deflation this year, that devaluation will bite harder than it would have. And with a recession on next year's horizon, Brazil should again see lower prices and another substantive devaluation. In addition, the dollar, the currency against which the real's downward progress is measured, has itself fallen roughly 10 percent since April against the mark and the yen, giving an added push lower to the real. Amid this improving outlook, some economists now believe the real is overvalued by only 8 to 15 percent. "In combination, these two factors -- inflation and the dollar -- paint an encouraging picture," said Neil Dougall, Latin America economist at Dresdner Kleinwort Benson, in a report. The real's overvaluation against the dollar had declined to less than 8 percent from 21 percent in January, he said. "By the end of 1999, all of the real's current overvaluation will have been eliminated -- moreover, without any change in the current depreciation rate of 7.5 percent a year," he concluded. The IMF-sponsored package of $30 billion to $45 billion is expected this week, and along with a fiscal package promising $84 billion in budget cuts over the next three years has quelled the market storms for the moment. Dollars started trickling back last week and stocks jumped 25 percent, reaching their highest level since the Russian crisis hit, after the government announced the sweeping fiscal cuts to qualify Brazil for international aid. A Reuters poll of economists last week found that the risk of a steep, sudden devaluation of the real fell thanks to the fiscal austerity plan and expectations of an IMF-led loan. The probability of a once-off devaluation of more than 15 percent between now and the end of 1998 fell to 6 percent from 13 percent last month, while chances of a devaluation in the first six months of 1999 fell to 17 percent from 22 percent. "We have successfully devalued the currency without stoking inflation," said Carlos Kawall, chief economist at Citibank in Sao Paulo. He predicted the real would end 1998 overvalued by 7 to 8 percent, down from 19 percent at the end of last year. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9612)	11/11/1998 6:13:00 PM
From: Steve Fancy	Respond to of 22640

Influential Brazilian politician opposes tax rise Reuters, Wednesday, November 11, 1998 at 17:50 BRASILIA, Nov 11 (Reuters) - An influential Brazilian politician defeated in recent state elections said Wednesday he would instruct his party to vote against a financial transactions tax increase included in a sweeping fiscal austerity plan. The government has suggested raising the tax, known as the CPMF, to 0.38 percent from 0.20 percent as part of a three-year plan to save or raise $84 billion and redress a chronic imbalance in Brazil's financial books. "I will recommend that members of the PPB (Brazilian Progressive Party) vote against the increase in the CPMF," said PPB President Paulo Maluf, who narrowly failed in his bid to become governor of economically powerful Sao Paulo state. Analysts say Congress must urgently approve the fiscal measures to bring Latin America's biggest economy back from the edge of a financial abyss. The International Monetary Fund was expected to announce this week a multibillion-dollar credit line to restore investor confidence in Brazil's battered economy and shore up the local currency, the real. Analysts had predicted that Maluf might oppose some of the fiscal austerity measures after he lost the October election to incumbent governor Mario Covas, a close friend and ally of President Fernando Henrique Cardoso. Maluf, a former mayor of Sao Paulo, was said to be upset about Cardoso's out-and-out support for Covas. Although Maluf's backing for Cardoso has never been unconditional, his influence over the PPB, the fourth biggest party in the lower house of Congress, has been essential to the government's attempts at approving reforms. The Chamber of Deputies last week passed a long-delayed bill to plug huge losses in the pension system, in what was seen as a key indicator of the government's ability to push through unpopular measures contained in its fiscal plan. joelle.diderich@reuters.com)) Copyright 1998, Reuters News Service

To: Steve Fancy who wrote (9612)	11/11/1998 6:14:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

LatAm markets may have discounted IMF/Brazil deal Reuters, Wednesday, November 11, 1998 at 17:54 By Ian Simpson NEW YORK, Nov. 11 (Reuters) - Latin American equity markets are likely to shrug off completion of an International Monetary Fund (IMF) financial rescue package for Brazil, analysts and fund managers said. They told Reuters this week that regional markets' recent rises showed they had already taken into account approval of the long-awaited IMF deal, which is expected to range from $30 billion to $45 billion. Announcement of the package aimed at shoring up the world's eighth-biggest economy could come this week, according to a Brazilian negotiator. The market analysts and managers recommended investors take advantage of bargain Brazilian prices and put their money in blue-chip stocks, such as telecommunications and power utilities. Those sectors are seen in the best shape to ride out a widely predicted recession next year. "Regardless of what comes out of Washington and (a central bank interest-rate meeting Wednesday) the market is going to rise," said Daniel Selcow, a Latin American portfolio manager at Nomura Asset Management USA Inc. "But my impression is that most of the news is already discounted." David Chon, chief Latin American equity strategist at Bear Stearns, said Brazil, the area's biggest economy, remained the focus for regional investors. He added the IMF package and Brazilian efforts to close a gaping budget deficit had already eased investors' fears about devaluation of Brazil's currency. The relief has helped fuel a 63 percent rise in Brazil's benchmark Bovespa stock index (INDEX:$BVSP.X) in the last month. Latin American shares are up about 53 percent overall in the same period. "It's down to a stock-picking environment, since the big bounce has already taken place," Chon said. International lenders hope the IMF program will avert a full-blown economic crisis in Brazil. They fear a financial meltdown there might drag the rest of Latin America into recession and further undermine global growth, which has been hurt by crises in Asia and Russia. The package is also seen as crucial at lowering interest rates that were sharply raised to protect the currency. The Central Bank's basic assistance rate is almost 50 percent a year and the benchmark overnight rate is 42.75 percent. Analysts and investors said stocks in telephone companies, such as Telebras (SAO:TELB4) (NYSE:TBR) and its spinoffs, and state-run utilities facing privatization were better bets than banks and retailers. Jane Heap, Latin American equity strategist at Deutsche Bank, said banks and retailers would have to grapple with a likely 1999 recession caused by the high interest rates. "Once you see them start to come down, then look at the private sector," she said. Copyright 1998, Reuters News Service