EMERGING MARKETS-Latam stocks extend rally as risk appetite grows

Wed Mar 26, 2014 1:04pm EDT

SAO PAULO, March 26 (Reuters) - Latin American stocks gained
for an eighth consecutive session on Wednesday as hopes of
stimulus measures in China and Europe coupled with
better-than-forecast U.S. economic data supported investors'
appetite for risk.
    But Brazil's real and Mexico's peso, the
most-traded currencies in the region, halted their recent rally
after hitting multimonth highs.
    MSCI's benchmark stock index for Latin America
 rose 0.4 percent in its eighth straight positive
session. Brazil's benchmark Bovespa index also climbed
0.4 percent, leading regional gains.    
    The Bovespa index has gained more than 8 percent since March
14, when it closed below 45,000 points for the first time in
nearly five years.
    "We have heard that investors are reallocating in Brazil
some of their positions in Russia and China," said Hersz Ferman,
an economist with Elite brokerage in Sao Paulo, citing Russia's
problems with Ukraine and China's weak economic data.
    "Global markets are more keen on risk assets," he added.
    Appetite for risk increased as investors looked past the
Russia-Ukraine crisis to focus on U.S. data showing orders for
manufactured goods rebounded in February while the services
industry grew solidly in March. 
    Expectations that China's central bank could unveil new
stimulus measures to support the economy have also buoyed
emerging markets over the past few days.
    In Latin America, equity gains in Brazil were driven by
banking share price rises by Bradesco and Itau
Unibanco. 
    Meanwhile, shares of telecommunications firm Oi 
plunged nearly 10 percent after Brazil's securities watchdog
said the company's controlling shareholders could vote on the
terms of an upcoming merger with Portugal Telecom,
rejecting objections from minority shareholders. 
    
 

    In the foreign exchange market, the Chilean peso 
rallied 1 percent to its strongest level in a month, on hopes
that China stimulus would boost the outlook for copper, Chile's
main export.
    The Mexican peso was little changed, however, after a
four-day rally drove it to a two-month high.
    The Brazilian real erased early gains, weakening 0.2
percent, after the central bank initially sold slightly more
than half of the currency swaps it has been offering on a daily
basis to support the exchange rate.
    The partial sale of swaps - derivatives that provide hedge
against currency losses - raised speculation that policymakers
could become less aggressive in their currency intervention as
the real climbed to four-month highs.
    Shortly after the central bank's regular swap auction, in
which it sold 2,400 of the 4,000 contracts offered, the bank
conducted an additional auction in which it managed to sell the
remaining 1,600 contracts.
    Still, many analysts interpreted the move as a sign that
policymakers are not willing to let the currency gain past the
key 2.3-per-dollar level.
    "The central bank is trying to defend that (2.3-per-dollar)
level, but without fanfare," said an analyst with a foreign fund
manager.
    Others were just confused about the central bank's strategy.
    "The central bank initially signaled the dollar couldn't
fall to such a low level (against the real), but then it came
back to the market and sold the remaining swaps. Everybody is
trying to understand what that means," said Jaime Ferreira, a
currency desk manager at Intercam, a brokerage in Sao Paulo.
        
    Key Latin American stock indexes and currencies at 1630 GMT:

     Stock indexes     Latest         Daily pct  YTD pct
                                      change     change
 MSCI Emerging         969.03         1.1        -4.41
 Markets                                         
 MSCI LatAm            3,052.53       0.42       -5.03
                                                 
 Brazil Bovespa        48,353.09      0.36       -6.12
                                                 
 Mexico IPC            39,811.7       0.05       -6.82
                                                 
 Chile IPSA            3,709.35       0.04       0.27
                                                 
 Chile IGPA            18,345.17      0.01       0.65
                                                 
 Argentina MerVal      6,168.11       -0.42      14.41
                                                 
 Colombia IGBC         13,399.19      0.03       2.51
                                                 
 Peru IGRA             14,189.75      0.39       -9.93
                                                 
 Venezuela IBC         2,501.19       7.24       -8.60
                                                 
                                                 
 Currencies            Latest         Daily pct  YTD pct
                                      change     change
 Brazil real           2.3094         -0.18      2.05
                                                 
 Mexico peso           13.1215        -0.05      -0.70
                                                 
 Chile peso            553.6          1.01       -4.97
                                                 
 Colombia peso         1,971.09       0.35       -1.98
                                                 
 Peru sol              2.811          0.07       -0.64
                                                 
 Argentina peso        8.0025         0.06       -18.87
 (interbank)                                     
                                                 
 Argentina peso        10.86          0.64       -7.92
 (parallel)