Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Steve Fancy who wrote (11870)	1/16/1999 2:28:00 AM
From: Steve Fancy	Respond to of 22640

Latam markets charge as Brazil float cheers bulls Reuters, Friday, January 15, 1999 at 19:01 (Writes through, updates with markets closing) By Martin Roberts MEXICO CITY, Jan 15 (Reuters) - Latin American stocks soared on Friday after investors greeted with relief Brazil's decision to cut its real currency loose, at least for now,proving wrong pundits who for months had predicted a meltdown. Brazilian stocks notched up their second-biggest rise to date when buyers jumped back into the market just two days after attempts to ease devaluation pressures by widening the real's intervention band misfired and drained the country's reserves. "It was supposed to be Armageddon when the Brazilians devalued, but apparently people feel so relieved that it's done with, at least for the time being, that it's creating a kind of party," said Felix Boni, analyst at Credit Lyonnais Securities Asia in Mexico City. Analysts feared a rerun of the "tequila crisis" in December 1994 when Mexico also had to ditch its intervention band two days after widening it bled reserves dry rather than restore confidence. Analysts said that Brazil exactly replayed Mexico's tequila timetable, but investors bought on vital underlying differences between the two countries: Brazil had far more reserves than Mexico did in 1994 and markets had much more time to brace for a Brazilian devaluation. Bulls pitched Brazil's leading Bovespa index upwards a jaw- sagging 33.4 percent to 6747 points, which virtually erased share losses for the year in nominal terms. "The money has come pouring into the (Brazilian) market," said Geoff Dennis, global emerging markets strategist at Deutsche Bank Securities in London. "It's a relief rally. It's a bounce off the bottom." But Dennis thought market reaction was "over-euphoric" because Brazil's underlying public debt problem and the prospects of a recession in 1999 had not gone away. "The currency is still not at an equilibrium level, the fiscal side is not clearly getting any better, the economy is still very weak, these are all reasons why perhaps this thing has just bounced too much and why the foreigners have not got interested yet," he said. A surprise rally by Mexico's peso made the bulls charge in to Latin America's second biggest market and drove its benchmark IPC stock index up 7.8 percent to 3617.77 points "Who would have said that, once the Brazilians decided to do away with the band, that the peso would gain?" Boni said. Mexico's widely watched 48-hour peso clawed back 3.9 percent from its record low close against the dollar on Thursday. Argentine shares echoed gains next-door in Brazil and broke a six-day slump to soar 12.3 percent, closing the MerVal index at 382.37 points. "It was a very strong recovery, but then again, some people here were really down. They needed to cover positions," said Lucio Bruno, a trader with Montelatici brokerage. Chile's leading IPSA index gained 2.74 percent to 89.72 points, while the key IBC index in Venezuela edged 1.48 percent higher to 4179.39 points. mexicocity.newsroom@reuters.com)) Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11870)	1/16/1999 2:33:00 AM
From: Steve Fancy	Respond to of 22640

IMF Moves to Protect Markets In Latin America From Volatility By MICHAEL M. PHILLIPS Staff Reporter of THE WALL STREET JOURNAL WASHINGTON -- With Brazil struggling to ward off financial chaos, the International Monetary Fund is scrambling to protect the next possible victims of global volatility: Argentina and Mexico. After Brazil broke from its economic game plan this week by devaluing its currency, IMF Managing Director Michel Camdessus told Argentine and Mexican officials that the fund was ready to provide new funds to keep instability at bay. Containing the Contagion Reporter Michael Phillips discusses White House and IMF concern about Argentina and Mexico in wake of Brazil's financial troubles. Argentina has a $2.9 billion, three-year IMF credit line and can draw on $840 million of it. An IMF spokesman said Mr. Camdessus told the country's finance minister, Roque Fernandez, that "the amounts could be increased if necessary." He offered similar assurances to Mexican Finance Minister Jose Angel Gurria. Mexico has no IMF credit line. But, nervous about the spread of the global crisis, its government has recently been discussing a possible loan with the IMF. The IMF-led $41.5 billion rescue package assembled for Brazil in November was designed to keep investor panic from flooding Latin America. In exchange, President Fernando Henrique Cardoso agreed to slash the enormous federal budget deficit to persuade investors to keep their money in the country. The IMF agreement also envisioned Brazil maintaining its exchange-rate policy, which allowed Brazil's currency, the real, to move within a narrow band, and allowed the band to depreciate gradually. But Mr. Cardoso was only able to persuade politicians to accept some of his budgetary proposals, and on Wednesday, Brazil allowed the real to fall 8.3% against the U.S. dollar. As a result, investors have continued to flee the country, and the Bovespa stock index fell nearly 10% Thursday. The developments have put the IMF in a tough spot. IMF and Brazilian officials must renegotiate the loan terms, since the devaluation will probably increase the amount the government must pay to service its debts and throw it off its IMF-endorsed deficit targets. If Mr. Cardoso can't follow through on his promises, the IMF and its backers at the U.S. Treasury will have to decide whether to cut off the rescue effort. That's no small dilemma. On the one hand, the IMF's credibility as a global financial firefighter suffers if borrowing countries ignore its policy advice. On the other, Brazil, the world's ninth-largest economy, is still seen as a key to keeping Latin America economically sound. Since Russia effectively devalued its currency and declared a moratorium on some domestic debt in August, the IMF has refused to provide new funding to Moscow, for fear of throwing good money after bad. The Russian moves sparked the run on Brazil and temporarily tightened credit availability world-wide. "The international capital markets are much more normal than they were three months ago," said one IMF official. Nonetheless, the IMF worries about Brazil's impact on Argentina, Mexico and the rest of the region; indeed, the stock markets in both Argentina and Mexico have been rocked by the developments. Brazil's woes raise doubts about the viability of preapproved IMF credit lines proposed by President Clinton this past fall, aimed at providing resources to countries with prudent economic policies before they are hit by financial panic. The Brazil rescue package was supposed to be a model for how it might work. But so far, Brazil is simply a reminder that if economic policies go awry, money may not help.

To: Steve Fancy who wrote (11870)	1/16/1999 2:42:00 AM
From: Steve Fancy	Respond to of 22640

Brazil Awards Telecom Licenses, Despite Financial Turbulence Dow Jones Newswires NEW YORK -- Brazil's move to allow the real to float freely on Friday didn't impede the government's completion its auction of two telecommunications licenses. The licenses, aimed at establishing competitors for units of the former Telecomunicacoes Brasileiras SA, or Telebras, were awarded to separate consortiums -- Canadian BCE Inc.'s Bell Canada International Inc. unit and Britain's National Grid PLC. See more coverage on the events in Brazil The low-key bidding stood in sharp contrast to the wildly successful, $19 billion auction of Telebras's assets last summer. Brazil granted the National Grid group, which also includes Sprint Corp. and France Telecom SA, a concession to operate a long-distance service provider. It will go up against Embratel Participacoes SA, owned by MCI Worldcom Inc. The National Grid-led consortium agreed to pay $36.7 million for its concession. The government awarded a license to the BCE group, which also includes Qualcomm Inc. and local firms, to provide local service to 16 Brazilian states. Bell Canada said its winning bid was valued $40.6 million. The consortium plans to invest $1 billion in developing the lines. The new company, named Canbra, will compete with the Tele Norte Leste Participacoes SA, which was purchased last summer by a group headed by Brazilian construction company Andrade Gutierrez. Only three groups submitted proposals to participate in the auction by the Dec. 11 deadline. Officials had expected at least six bidders. No proposals were submitted to compete against Telesp Participacoes SA, the wireline unit purchased by Spain's Telefonica SA. There were also no bidders for the mirror concession to compete against Tele Centro Sul Participacoes SA, which serves the southern states of the country and was acquired in July by Telecom Italia SpA. Many phone companies covet the Brazilian market. BellSouth Corp. the Atlanta-based Baby Bell phone company, leads a group of companies that bid more than $3 billion in 1997 to win coveted licenses to operate cellular-phone networks in Sao Paulo and a six-state region in northeast Brazil.

To: Steve Fancy who wrote (11870)	1/16/1999 2:46:00 AM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil Politics Seen Key To Weekend Talks In Washington By DAMIAN MILVERTON Dow Jones Newswires WASHINGTON -- When Brazil's finance minister and central bank chief arrive here Saturday for crisis talks with U.S. government and multilateral financial institutions, their evaluation of the political climate in their homeland could prove more crucial than plans for a new currency regime. Policy analysts in Washington believe the burst of instability that rocked Brazil's markets and eventually freed the real from its trading band stemmed from concerns over the fitful pace of economic reforms and the rebellion of a state governor on debt repayments to Brasilia. Any plans put forward this weekend by Pedro Malan and Francisco Lopes - respectively Brazil's finance minister and central bank president - will need to be accompanied by virtually ironclad guarantees they won't be negated by Brazilian politics. "Rational people simply do not wish to make investments or keep their money in this confused, disorganized and uncertain environment," said Michael May, a director of the Mercosur project at the Center for Strategic and International Studies in Washington. The Brazilian central bank announced earlier Friday it wouldn't intervene to support its currency, the real, and effectively removed it from a new, wider trading band set Wednesday. With the U.S. Treasury and the IMF staunch advocates of free market policies, any plans by Brazil to move toward a new foreign exchange policy with a floating real are unlikely to meet much argument in Washington. But discussions over the political handling by President Fernando Henrique Cardoso's administration of its crucial structural reform package could be a little more heated. Washington insiders believe the IMF is chagrined by the Brazilian government's fumblings in trying to push reforms through Congress, which in December recoiled by rejecting a major pension plan reform. "People are not going to flee the economy because of higher interest rates or otherwise right now but they will pull out if they feel that Congress isn't going to pass the reform program," said Jeffrey Schott, senior fellow at the Institute for International Economics. "If the float is accepted as the new exchange rate regime, it will need a renewed commitment that the reforms will pass through Congress for it to be effective," he said. Brazilian authorities plan to unveil their strategy for a new Brazilian foreign exchange system Monday, leaving time for Malan and Lopes to consult the International Monetary Fund, the World Bank, the Inter-American Development Bank and U.S. Treasury department during the weekend. Financial markets greeted the prospect of a floating real with unrestrained jubilation Friday, with the Bovespa stock index rocketing a remarkable 33% as investors stampeded back into the market. The IMF said freeing the real "appears to be a wise move to stop the loss of reserves," adding that its senior executives had been consulted by Brazilian authorities in advance of Friday's changes. Treasury Secretary Robert Rubin echoed the thoughts of policy analysts when he said late Friday that providing further financial aid to Brazil is not an option. Lawrence Summers, Rubin's second in command, will meet Malan and Lopes Sunday and is likely to reinforce the view that swift implementation of reforms is essential to any plans they might have to restoring investor confidence. The IMF was reportedly deeply concerned by this week's sharp increase in capital flight from Brazil, which raised the prospect that a sizable part of the $41.50 billion it arranged for Brazil from international lenders last November could disappear defending the real. "They are not going to top up the rescue package," Schott of the IIE said. Instead, the Brazilians and their Washington allies will need to review the impact of a changed currency system on the economic projections contained in Cardoso's fiscal restructuring blueprint and determine whether the reforms can still be implemented fast enough to assuage market concerns. Some policy analysts believe that waiting for a resumption of Brazil's Congress in February is no longer an option. Instead, Cardoso might need to implement some measures using executive privilege without immediate Congressional approval. The risk to this strategy is that such measures still need to be ratified by Congress and defeat of reforms already made law would cause far greater destruction in financial markets than seen this week. Moving immediately to a free floating currency also holds dangers that weren't reflected in Friday's astonishing reaction to the central bank's decision to step back from the market. Leonardo Freire, associate director at Warburg Dillon Read in Sao Paulo, hopes the central bank sets a wide trading band Monday, with the average rate at BRR1.47, its closing level on Friday, as a mid-point of the new band. This is seen as the most palatable option by those who feel the market isn't ready for a free float in such an unstable environment, no matter what exuberance might have greeted the initial prospects of a floating currency. If the real was freed to float, any sharp and unchecked fall in its value would increase Brazil's considerable dollar-linked debt burden, which recently stood at $226.5 billion. Around $30.00 billion of this total must be repaid before the end of the year. -By Damian Milverton, +202-862-9272; damian.milverton@dowjones.com. (Stephen Wisnefski contributed to this article.)

To: Steve Fancy who wrote (11870)	1/16/1999 2:55:00 AM
From: Steve Fancy	Respond to of 22640

WRAP: Brazilian Mkts Applaud Govt's Fri Free-Float Gamble By ADRIANA ARAI and STEPHEN WISNEFSKI Dow Jones Newswires SAO PAULO -- Brazil's financial markets finally heard something they liked. Two days after making the dollar-real (BRR) trading band 10 times wider, which markets felt wasn't enough, the government's decision Friday to allow the real to float freely - for the day - was applauded vigorously. "That's what the market looked for, and they got it," said Leonardo Freire, associate director with Warburg Dillon Read in Rio de Janeiro. "The central bank did the right thing. It took pressure off the market, and let it focus on other things, which reflected in a strong fall in interbank interest rates." In futures markets, interest rates fell across the board. January contracts projected rates at 2.299% monthly Friday, from 3.441% Thursday, while February's rates slid to 2.6023% from 3.023%. After a shaky start following a six-session losing run, the Sao Paulo Stock Exchange, South America's largest, breathed a sigh of relief with news of the free float. The benchmark Bovespa Index shot higher immediately and continued rising throughout the session to end at 6,746, up 33%, the second-largest one-day jump in history. The currency market, for its part, was completely lost at the opening, dealers said, as dollar quotes surged above the trading band ceiling of BRR1.32 per dollar, and the central bank didn't seem to care. Once the government confirmed it wouldn't intervene, the real weakened to as much as BRR1.55 per dollar, before settling at BRR1.43 by Friday's close. Late Friday, Finance Ministry executive secretary Pedro Parente termed the market reaction "favorable," saying that the government would continue to closely monitor market movements. It's true that local stocks were dirt cheap in dollar terms and foreign investors flocked into the Bovespa to bottom-feed. But sentiment about Brazil did improve a lot, as investors realized that the devaluation also means the country's international reserves won't evaporate overnight. "The devaluation cuts our external borrowing requirements tremendously," said Luiz Fernando Figueiredo, treasury director with BBA Creditanstalt in Sao Paulo. "We estimate that the current account deficit will fall by between $11 billion and $13 billion, to some $20 billion," he said, adding that it takes pressure off the fiscal side as well. Traders and analysts also said the devaluation helps smooth an incipient political confrontation that has threatened the approval of the government's all-important fiscal plan in Congress. "The forex changes make the political scenario look a lot brighter," a Sao Paulo-based head trader said. "It sent a responsibility shock-wave to congressmen, which boosts the chances of easy approval." The fiscal plan seeks to save the government BRR28 billion this year and was the cornerstone of an agreement with international lenders for $41 billion in aid. Key next week is Congress' vote Wednesday on a measure to tax civil servants and public sector retirees, which has been already rejected four times in the past four years. -By Adriana Arai and Stephen Wisnefski; (5511) 813-1988; aarai@ap.org; swisnefski@ap.org

To: Steve Fancy who wrote (11870)	1/19/1999 10:40:00 AM
From: Alfredo Nova	Read Replies (3) \| Respond to of 22640

Steve, I have truly a great respect for your competency about the Brazilian market, but I definitely do not share your propensity to do options. I have never done options and never will. It is like betting on horses. By doing options, you give up a very important element in doing profitable trading: time. With options, time may suddenly start working against you. Instead, with stocks, time is never a problem. Simply buying normal shares is good enough for me, thanks for all the good inputs so far , Alfredo