EMERGING MARKETS-Mexican stocks lead region, end yr up 17.88 pct

Mon Dec 31, 2012 4:54pm EST

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* Mexico IPC finisheds flat for day on Monday
    * Brazilian and Chilean markets closed on Monday
    * Markets await "fiscal cliff" deal

    By Gabriel Stargardter
    MEXICO CITY, Dec 31 (Reuters) - Mexico's IPC stock index
 ended the year up 17.88 percent, significantly
outperforming Brazil's Bovespa, as Mexico benefits from its
proximity to an improving U.S. economy and hopes about potential
domestic reforms.
    Following last minute wranglings over the U.S. "fiscal
cliff," the IPC ended flat on Monday at 43,705.83 points. 
    By comparison, Brazil's Bovespa, which was closed on
Monday, rose 7.4 percent for the year. Chile's IPSA,
also closed on Monday, was up just shy of 3 percent for 2012.
    "It's been an extraordinary year," said Gerardo Roman, head
of trading at the Actinver brokerage in Mexico City, of the
performance of Mexican stocks in the face of a "fundamentally
bad" global economic backdrop.
    But continued gains in Mexican stocks are far from assured,
Roman said, citing heavy dependence on two factors: an improving
U.S. economy and fiscal and energy reforms that new Mexican
President Enrique Pena Nieto has earmarked for completion within
a year. Mexico sends about 80 percent of its exports to the
United States. 
    "It's all down to the reforms," said Roman, who warned that
Mexican stocks were now relatively "pricey" compared with
Brazil's. 
    An energy reform, which would open up state-owned oil giant
Pemex to outside investment, could translate into a
windfall for petrochemical companies like Mexichem,
while fiscal reform would benefit retailers like Femsa
, Roman said.
    Analysts, traders and fund managers also highlighted
Mexico's banking sector as one to watch next year, after the
successful listing of Spanish bank Santander on
Mexican and U.S. bourses raised more than $4 billion.
    The over-subscribed listing was the year's second largest in
the United States after Facebook's, and bolstered Mexico's
reputation as Latin America's investment darling. 
    "Banks are a great way to capture an improving economy:
they're right in the middle of it," said Geoffrey Pazzanese,
co-manager of the Federated InterContinental Fund in New York,
who was betting on Mexico's Banorte for next year.
    With hours to go until the deadline of the U.S. "fiscal
cliff," some sort of contract seemed to be emerging. But with no
definitive deal in place, the short-term outlook for Mexican
stocks could be rocky. 
    If no deal is reached, the United States could fall back
into recession as a combination of spending cuts and tax hikes
bites into the country's fragile recovery. 
    "The market is expecting a deal to be reached," said Roman.
"Let's wait and see what happens."
    Telecommunications giant America Movil, down 0.64
percent, drove losses in the IPC, while mining group Penoles
 ended the day up 1.99 percent. 
    
    Latin America's key stock indexes at 2111 GMT:
    
 Stock indexes                                    % change
                              Latest              
                                                          
 MSCI LatAm                          3,807.19         0.17
                                                  
 Brazil Bovespa                     60,952.08         0.89
                                                  
 Mexico IPC                         43,705.83        -0.04
                                                  
 Chile IPSA                          4,301.38         0.16
                                                  
 Chile IGPA                         21,070.28          0.2
                                                  
 Argentina MerVal                    2,854.29         0.53
                                                  
 Colombia IGBC                      14,715.84         0.04
                                                  
 Peru IGRA                          20,629.35          0.4
                                                  
 Venezuela IBC                     471,437.06         0.79
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