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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: accountclosed who wrote (16848)	1/22/1999 4:49:00 PM
From: MythMan	Read Replies (1) \| Respond to of 86076

Friday January 22, 4:22 pm Eastern Time (Note: this article is ''in progress''; there will likely be an update soon.) Emerging debt down, Brazil default rumors swirl NEW YORK, Jan 22 (Reuters) - Emerging debt sank Friday under the weight of rumors that Brazil may restructure its domestic debt or adopt capital controls as a way of coping with its sinking currency, analysts said. ''People are dreaming up worst-case scenarios because they don't see an improvement in Brazil in the short term,'' said Siobhan Manning, Latin American debt strategist at PaineWebber. Brazil's newly floating currency has sunk about 30 percent since the country abandoned its trading band a week ago. Russia's devaluation of the rouble and default on some of its debt in August cast a shadow over Brazil Friday. ''Russia started defaulting with its domestic debt, so people like to draw parallels between the two countries,'' Manning said. Brazil has 300 billion reals in short-term domestic debt. ''I don't think they will default. I think they will continue to roll it over at terms that are unfavorable to the government,'' Manning said. But Brazil will suffer more shocks before its sovereign debt sinks to the point where it becomes a good deal, one Wall Street analyst said. ''We have some more fallout on the way from the currency and from inflation,'' the analyst said. Argentine bonds outperformed Brazil debt Friday, after Argentine officials said they are drawing up a plan for dollarizing their economy. Brazil C bonds were down 2-7/8 to bid 51-1/8 Friday while Argentina PAR bonds were unchanged at a bid of 66-1/2 and Argentina GB17 paper was up 3/4 to bid 87-3/4. Earlier in the week, Argentine debt prices mirrored Brazil's. Argentina operates on a currency board system, which backs each peso in circulation with a dollar in reserve. ''Argentina is telling the market that if it speculates against the peso they will switch to the dollar,'' Manning said. ''I don't think they're going to dollarize, but it's an ingenious idea to say they're thinking about it and that they have a plan ready to implement if they're forced in that direction. It's like having an insurance policy,'' she added. Low equity prices around the world contributed to the bearishness in emerging markets Friday, as the Dow Jones Industrial Average sank more than a percentage point and a half late in the day. ''The market was bouncing but then the Dow went down, so that's why the market is finishing so poorly now,'' one emerging debt trader said.