EMERGING MARKETS-Brazil stocks fall to 10-week low on rate hike bets

Fri Feb 15, 2013 6:48pm EST

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* Brazil's Bovespa down 0.3 pct, Mexico's IPC gains 0.6 pct
    * America Movil rebounds from sharp loss to 1-1/2 year low


    MEXICO CITY, Feb 15 (Reuters) - Brazilian stocks fell to a
10-week low on Friday on concerns the central bank could tighten
monetary policy this year to fight inflation while Latin
America's top economy is still struggling to revive sluggish
growth.
    Mexican stocks rose as billionaire Carlos Slim's America
Movil bounced back from a 1-1/2 year low it hit after investors
dumped the stock following a surprisingly weak earnings report.
    Brazil's Finance Minister Guido Mantega on Friday expressed
concern about Brazil's inflation rate, fueling market bets that
the central bank could raise interest rates this year.
 
    Yields on interest rate futures rose sharply as
investors priced in the chance for an interest rate hike as soon
as May. Brazil slashed its benchmark interest rate to
a record low last year as the economy stumbled, but growth has
been slow to recover.
    "Monetary policy hasn't brought results, inflation is
rising, the government is trying to solve it with interventions
in some sectors, and all that is pushing investors away," said
Joao Pedro Brugger, an analyst with Leme Investimentos in
Florianopolis, Brazil.
    Brazil's benchmark Bovespa stock index fell 0.3
percent to 57,903.30 points.
    The index clocked its fourth straight weekly loss, losing 1
percent this week, and is down nearly 5 percent this year.
    On Friday, shopping center operator BR Malls Participações
SA fell 4.44 percent while homebuilder Gafisa SA
 shed 3.08 percent. Higher interest rates could dampen
consumer demand for goods and housing.
    Meanwhile, bank shares rose, since lenders usually make
larger profits when interest rates are higher.
    Itau Unibanco Holding SA, Brazil's largest
non-government bank, added 4.64 percent, while rival Banco
Bradesco gained 4.42 percent.
    Analysts cited more favorable conditions for banks under a
higher interest rate scenario, in which they would gain more
from holdings of interest-rate-linked government debt and face
decreasing government pressure to reduce lending spreads.
    Mexico's IPC index rose for the first day in five,
adding 0.63 percent to 44,152.96. The index shed 2 percent this
week, its worst week since November.  
    Before Friday's rebound, the IPC had shed more than 4
percent from a record high in late February. Mexican stocks
mounted successive all-time highs since last year as its economy
grew faster than Brazil.
    Data on Monday is expected to show that Mexico's economy
slightly picked up speed in the fourth quarter as healthy
internal demand offset weaker manufacturing and construction
output, according to a Reuters poll. 
    Billionaire Carlos Slim's telecommunications firm America
Movil, which accounts for one-fifth of the IPC, rose 2
percent on Friday as it bounced back from its steepest one-day
slump in five years on Wednesday after posting weak earnings.
    Its earnings had been hurt by a foreign exchange loss of
close to $400 million, but the company's chief financial officer
said America Movil, Latin America's biggest phone company, has
no plans to change its currency management strategy.
 
    Shares of Mexican miner Penoles shed 3.47
percent after Citigroup cut its rating to "sell" from "neutral"
on the shares of Fresnillo, the precious metals miner
controlled by Penoles.
    Citigroup recommended selling Fresnillo on concerns over
waning momentum in gold and silver prices as gold prices slid to
a six-month low. 
    Chile's IPSA index fell 0.33 percent as retailer
Falabella lost 1.16 percent. The index closed the week
about flat.
    Latin America's key stock indexes at 2300 GMT:
 Stock indexes                      daily %    YTD %
                                     change   change
                         Latest              
 MSCI LatAm               3,884.59     0.23     2.29
                                             
 Brazil Bovespa          57,903.30     -0.3    -5.00
                                             
 Mexico IPC              44,152.96     0.63     1.02
                                             
 Chile IPSA               4,594.85    -0.33     6.82
                                             
 Chile IGPA              22,335.32     -0.3     6.00
                                             
 Argentina MerVal         3,295.42    -0.25    15.45
                                             
 Colombia IGBC           14,960.90    -0.51     1.67
                                             
 Peru IGRA               21,108.10    -1.34     2.32
                                             
 Venezuela IBC           597,590.1     1.42    26.76
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