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

To: wl9839 who wrote (15422)	5/20/1999 1:15:00 PM
From: Steve Fancy	Respond to of 22640

Brazil shares seen boosted by fresh local rate cut Reuters, Thursday, May 20, 1999 at 09:14 SAO PAULO, May 20 (Reuters) - Brazilian shares were expected to open with gains on Thursday, shaking off worries about a possible devaluation in neighboring Argentina and drawing optimism from news of a fresh local interest rate cut, traders said. Sao Paulo's benchmark Bovespa stock index (INDEX:$BVSP.X) closed 1.22 percent lower at 12,118 points on Wednesday amid rumors Argentina may release its tight grip on the peso currency, which has been pegged one-to-one to U.S. dollar since 1991. But the Central Bank's move late Wednesday to cut its Selic reference rate from 27 percent to 23.5 percent, lower than had been expected by analysts, overtook other issues, they said. "The market should be more optimistic at the open today with the reduction in rates. The improved scenario overseas should also help the bourse," one trader said. Brazil's Monetary Policy Committee (Copom) trimmed the benchmark rate in the seventh cut in about two months and also maintained the bias to further ease the rate before its next meeting. The Selic sets the yields on government debt and is used to determine consumer credit rates. Analysts had expected the Copom to cut rates to 24 percent or 25 percent. Copom officials said low inflation was the main reason for the reduction. Gains in European bourses and expectations that Wall Street shares would open steady to higher were also seen as giving buoyancy to Brazil's stock market. rio.newsroom@reuters.com)) Copyright 1999, Reuters News Service

To: wl9839 who wrote (15422)	5/20/1999 1:17:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Hold on to your Argentina bonds, U.S. analysts say ReutersPlus, Thursday, May 20, 1999 at 12:52 By Apu Sikri NEW YORK, May 20 (Reuters) - Major U.S. investment banks are advising clients to hold on to investments in Argentina in the face of political uncertainty and speculation that the country may abandon a staunch fixed currency policy. "It is totally overdone," said David Sekiguchi, analyst at J.P. Morgan Securities, commenting on speculation that Argentina may be forced to abandon the peso's peg to the dollar. The government has vehemently denied that any such plan is afoot. "Argentina has legitimate problems, but it has little to do with the abandoning of convertibility, particularly in the near-term," Sekiguchi added. Morgan and several other banks are recommending neutral or slightly underweight positions in Argentina's bonds relative to a benchmark market index. But they are advising against selling current positions. Analysts cite rising joblessness, a bloated fiscal deficit and impending presidential elections as reasons for their caution on Argentina. Despite these problems, most money managers and analysts still view Argentina as a more sound economy than Brazil. That view is reflected in the countries' bond prices. Brazil's global bonds due 2027 on Thursday traded at 75 while Argentine bonds of the same maturity traded at 80-1/2. Carl Ross, analyst at Bear Stearns, has held an underweight recommendation on Argentina and an overweight on Brazil since March. But should prices on the debt of the two countries converge, "Argentina would look cheap," he said. "The convertibility law is solid, but we are a bit nervous about how Argentina is going to emerge from this recession," said Ross. Even as it pledges to maintain its dollar peg, Argentina will have to move quickly on labor reform. Strong unions and an overemployed public sector are damaging Argentina's competitiveness more than the fixed currency, said Rafael de la Fuente, economist at Paribas. "You need to get as lean and efficient a public and private sector as possible," said de la Fuente. "Convertibility is not the issue. Argentina is not a leveraged economy, so they can easily defend the regime. But they need to fix the fundamentals -- make the fiscal deficit more manageable and get a primary surplus that is consistent with the debt they have to pay down." Argentina has a currency board that links the peso to the dollar one-for-one. The country maintains enough dollars to cover every peso in circulation. Argentina's export competitiveness came under pressure after neighboring Brazil let the real currency float in January. Investors worry that Argentina may not aggressively attack its budget problems with elections later this year. Last week, Argentina announced it would not make previously-pledged cuts of $280 million in education spending. Argentina also told the International Monetary Fund last week that the country's budget deficit would be about $5.1 billion in 1999, or 1.5 percent of gross domestic product, higher than the $4.95 billion agreed with the IMF in April as part of a three-year loan program. Despite slow progress on the economic front, Argentina should be able to complete external debt financing of another $3 billion in the international capital markets, analysts said. "Argentina has always been willing to pay what it takes to raise debt, $3 billion should not be a problem unless the market worsens quite a bit," said J.P. Morgan's Sekiguchi. Copyright 1999, Reuters News Service