EMERGING MARKETS-Brazil's Bovespa lags Mexico's IPC in 2012

Fri Dec 28, 2012 3:00pm EST

* Bovespa weighed down by risk aversion, govt' meddling
    * Mexico's IPC rises on outlook for reforms, U.S. growth
    * Bovespa up 7.5 pct in year, Mexico IPC rises 17.5 pct

    By Asher Levine
    SAO PAULO, Dec 28 (Reuters) - Latin American stocks rose
broadly in 2012, with Mexico's IPC index outpacing Brazil's
Bovespa and Chile's IPC, though constant concerns over global
economic growth and the euro zone debt crisis kept investors on
edge.
    Brazilian stocks whipsawed throughout the year as concerns
over Europe's debt crisis, weak economic growth and government
intervention in the private sector offset the potential benefit
from abundant global liquidity and lower interest rates.
    Still, many analysts see room for Brazilian stocks to rise
in 2013 alongside an improvement in the economic outlook, both
domestically and abroad.
    Brazil's benchmark Bovespa index is set to close
Friday with a nearly 1 percent daily gain, as steelmakers and
banks rose. 
    This year's 7.5 percent gain was a stark improvement from
2011's loss of over 18 percent, but far short of the over 23
percent rise predicted in a December 2011 Reuters poll.
    Investors were optimistic at the start of the year as an
injection of liquidity by the European Central Bank and
record-low interest rates in Brazil fed risk appetite and drove
investors towards cheaper stocks with higher potential yields.
    Optimism soon turned to fear in the second quarter, however,
as mounting concerns over the euro zone debt crisis fueled a
rapid exit from Brazilian equities and pushed the Bovespa back
into the red, where it would mostly remain for the rest of the
year.
    While stocks posted a slight recovery in the fourth quarter,
gains were limited by concerns over mediocre economic growth in
Brazil and heavy government meddling in the private sector.
    "2012 was a complicated year," said Illan Besen, an equities
specialist at brokerage ICAP in Rio de Janeiro. "It was a year
of mismanagement by the Brazilian government in some sectors of
the economy and a year when China cut its growth projections,
which affect prices for some of the most heavily weighted
stocks, such as Vale and Petrobras."
    While a recent Reuters poll showed that investors are not as
optimistic about the Bovespa for 2013 as they were for 2012,
most analysts expect the index to post modest gains alongside a
steadily improving global economic scenario. 
    "We may begin to see an improvement in domestic activity at
the beginning of 2013, with more foreign inflows to the
Bovespa," said Luis Gustavo Pereira, a strategist with brokerage
Futura Corretora in Salvador, Brazil. 
    Pereira added that the improvement will hinge on whether
U.S. policymakers will reach a deal to avert the so-called
"fiscal cliff" of automatic tax hikes and spending cuts that
could throw the U.S. economy into recession.
    Mexico's IPC index rose slightly on Friday,
contributing to a 17.5 percent gain for the year. Monday's
session will be the IPC's last this year.
    The IPC's performance, which outpaced the S&P 500 index's
 12 percent rise in 2012, was based around growing
investor confidence in the country's finances, an improvement in
the U.S. economy, and optimism that the country's newly elected
government would enact wide-ranging economic reforms. 
    "The deficits are controlled, the exchange rate is
manageable, we have plenty of foreign reserves, both internally
and in terms of a credit line with the IMF with which we can
steel against any external shock," said Esteban Velásquez, head
of market analysis for fund distributor Allianz Fondika in
Mexico City. "Growth has also been revised upwards and reforms,
so needed by this country, are around the corner."
    Chile's blue-chip IPSA posted a 0.16 percent gain on
Friday as investors moved around their portfolios in a
high-volume, pre-holiday session, leaving its accumulated gain
in 2012 at just under 3 percent.
    Disappointing corporate earnings - due to high energy costs,
rising wages and a corporate tax hike - and a slew of capital
increases weighed on the IPSA this year. The local index would
have ended in negative territory if not for a nearly 4 percent
increase in December.
    "Next year we see the IPSA remaining under pressure until
April or May on a number of factors, including uncertainty
surrounding the U.S. fiscal cliff, stiff energy costs and
ongoing capital increases," said Alfredo Parra, analyst at
Santiago-based brokerage EuroAmerica.
    A low-base of comparison for corporate earnings, though,
will help fuel a 10 percent to 12 percent rise in IPSA for all
of 2013, Parra added.
    
    Latin America's key stock indexes at 1845 GMT:
 Stock indexes                           daily %      YTD %
                          Latest          change     change
 MSCI LatAm                  3,801.36       0.89       4.59
                                                  
 Brazil Bovespa             61,007.48       0.98       7.49
                                                  
 Mexico IPC                 43,566.69       0.22      17.50
                                                  
 Chile IPSA                  4,301.38       0.16       2.96
                                                  
 Chile IGPA                 21,070.28        0.2       4.67
                                                  
 Argentina MerVal            2,842.22        0.1      15.41
                                                  
 Colombia IGBC              14,631.24      -0.53      15.52
                                                  
 Peru IGRA                  20,404.84       0.13       4.78
                                                  
 Venezuela IBC             471,437.06       0.79     302.81
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