EMERGING MARKETS-Brazil stocks post best month in over two years

Mon Mar 31, 2014 5:49pm EDT

(Updates prices, adds quotes, context on rally)
    By Asher Levine
    SAO PAULO, March 31 (Reuters) - Brazilian stocks recorded
their biggest monthly rise in more than two years in March,
further boosted on Monday by comments from U.S. Federal Reserve
chief Janet Yellen.
    The broader MSCI Latin American stock index 
touched its highest level this year, while most currencies
across the region, with the exception of Brazil's real,
strengthened against the dollar. 
    Monday's rise in Brazil's Bovespa was the 10th in 11
days as the index closed above 50,000 points for the first time
in nearly three months.
    Much of the Bovespa's recent gain has been attributed to the
combination of rising risk appetite among global investors,
optimism over a potential change in government after October's
presidential election, and attractive valuations following a
broad sell-off of emerging market assets earlier this year. 
    "The market had fallen quite far because local pension funds
were selling off equities in favor of bonds," said Pablo
Stipanicic Spyer, a director at Mirae Asset Securities in Sao
Paulo. "We then saw foreign investors start to come back in a
case of 'buying the dips' with much of that money likely coming
out of Russian assets."
    Spyer's comments were echoed by analysts at the annual
meeting of the Inter-American Development Bank this weekend, who
suggested Latin American economies would continue to receive
short-term capital flows from investors fleeing Russia due to
fear of geopolitical instability. 
    Gains in the Bovespa may be limited, however, as a technical
indicator known as the relative strength index showed Brazilian
shares crossing into "overbought" territory for the first time
since Sept. 2013. 
    Monday's 1.3 percent gain was supported by signals from the
Fed's Yellen, who said in a speech on Monday that an
"extraordinary commitment" was still needed to support the U.S.
economy.
    Local shares tend to rise on the outlook for continued
monetary stimulus in the United States, which helps boost global
liquidity and often supports demand for riskier assets.
    Mexico's IPC stock index rallied for a third session
to touch its highest level since mid-February and close out its
best month since Dec. 2012.
    The IPC had slumped to its lowest level in more than seven
months in mid-March, but it rocketed back as global investors
snapped up bargains around the globe in emerging markets that
had been hammered in the first months of the year. 
    The IPC rallied back nearly 7 percent from its low to close
the month with a gain of 4.3 percent. 
    The Mexican economy slowed to a 1.1 percent expansion last
year, but data last week showed factory exports rose by the most
in more than four years, which backed expectations that Latin
America's No. 2 economy may be pulling out of a soft patch.  
    
 
    Yellen's comments also supported gains in most local
currencies, with the Mexican and Chilean pesos  
tracking slightly higher on the outlook for a weaker dollar.
    "Yellen said some things that were more 'dovish,' and that
took a bit of pressure off the market in relation to
(expectations for) higher interest rates in the United States,"
said Waldir Kiel, an economist at H.Commcor in Sao Paulo.
    Brazil's real was unable to hold onto gains, however, as
traders remained skeptical that the central bank would allow the
currency to appreciate much further after strengthening 3.31
percent against the dollar in March.
    
    Key Latin American stock indexes and currencies at 2031 GMT:
 Stock                         Latest    daily %    YTD %
 indexes                                 change     change
 MSCI Emerging Markets         994.65    0.99       -0.8
                                                    
 MSCI LatAm                    3194.2    1.32       -0.21
                                                    
 Brazil Bovespa                50414.92  1.3        -2.12
 Mexico IPC                    40461.6   1.03       -5.30
 Chile IPSA                    3772.76   0.35       1.99
 Chile IGPA                    18552.57  0.3        1.79
 Argentina MerVal              6373.82   2.82       18.23
 Colombia IGBC                 13827.01  1.11       5.78
 Peru IGRA                     14298.92  0.18       -9.23
 Venezuela IBC                 2523.11   0.06       -7.80
                                                    
 Currencies                    Latest    daily %    YTD %
                                         change     change
 Brazil real                   2.2635    0.17       4.12
 Mexico peso                   13.0487   0.16       -0.14
 Chile peso                    549.4     0.11       -4.24
 Colombia peso                 1971.37   -0.32      -2.00
                                                    
 Peru sol                      2.808     0.00       -0.53
 Argentina peso (interbank)    8.0000    0.03       -18.84
                                                    
 Argentina peso (parallel)     10.75     1.02       -6.98
                                                    
 

 (Additional reporting by Priscila Jordao and Bruno Federowski;
Editing by Peter Galloway and Andrew Hay)