EMERGING MARKETS-Latam markets extend rally but Bovespa halts gains

Tue Apr 8, 2014 2:35pm EDT

By Walter Brandimarte and Priscila Jordão
    RIO DE JANEIRO/SAO PAULO, April 8 (Reuters) - Latin American
markets extended their rally on Tuesday as investors hunted for
yield globally, although Brazilian stocks halted gains after
jumping 16 percent over the past three weeks.
    The Brazilian real  strengthened past 2.2 per
dollar for the first time since late October as investors sought
to take advantage of the country's rising interest rates while
betting that an upcoming government may adopt more
market-friendly policies.
    Hopes that Brazil's next leader will curb government
spending to fight inflation and reduce government intervention
in the economy have been encouraging investors since polls
started showing President Dilma Rousseff losing popularity among
voters. 
    Although Rousseff remains on track to win re-election on
Oct.  5, investors believe she could be forced to change her
policies in a second term as Brazilians grow increasingly
worried about inflation.
    Investors are "taking the view that a drop in her popularity
would increase the chances for a more market-friendly upcoming
government," Barclays' strategists Bruno Rovai and Koon Chow
wrote in a research note.
    Barclays recommended that clients maintain their exposure to
the Brazilian currency until it gains to 2.1740 per dollar.
    "There is still a favorable carry-trade environment in the
global markets which, together with positive idiosyncratic
factors, argues for investors to stay long the real," the bank
said, referring to a strategy in which investors borrow in a
low-yielding currency to fund investments in higher-yielding
ones.
    Brazil has become a magnet for foreign investors since
emerging market turbulence abated in the past few weeks as
investors sought to take advantage of cheap valuations in its
stock market.
    The benchmark Bovespa index slid 0.8 percent,
however, after posting gains during 12 of the past 16 sessions.
    The decline was driven by a slump of more than 3 percent in
shares of Petroleo Brasileiro SA, or Petrobras, which
had soared nearly 40 percent since March 17.
    "This is a correction from yesterday's gains, when the
Brazilian market decoupled from international bourses with gains
excessively focused on a few shares such as those of Petrobras,
Eletrobras and banks," said Hersz Ferman, an economist with
Elite brokerage in Sao Paulo.
    Despite the decline in Brazilian shares, the broader MSCI
index for Latin American stocks rose 0.7
percent, adding to gains of about 15 percent since mid-March.
    
 
    
    Key Latin American stock indexes and currencies at 1735 GMT:
    
     Stock indexes                daily %     YTD %
                     Latest       change      change
 MSCI Emerging      1011.66       0.75        0.15
 Markets                                      
 MSCI LatAm         3296.2        0.61        2.36
                                              
                                              
 Brazil Bovespa     51742.78      -0.79       0.46
                                              
 Mexico IPC         40890.62      0.73        -4.30
                                              
 Chile IPSA         3817.63       1.04        3.20
                                              
 Chile IGPA         18736.67      0.87        2.80
                                              
 Argentina MerVal   6487.53       0.67        20.34
                                              
 Colombia IGBC      13844.54      -0.21       5.92
                                              
 Peru IGRA          14436.98      0.94        -8.36
                                              
 Venezuela IBC      2523.22       0.07        -7.80
                                              
                                              
 Currencies                       daily %     YTD %
                                  change      change
                    Latest                    
 Brazil real        2.2041        0.67        6.93
                                              
 Mexico peso        12.992        0.14        0.29
                                              
 Chile peso         545.2         1.25        -3.50
                                              
 Colombia peso      1930.04       0.17        0.10
                                              
 Peru sol           2.808         0.00        -0.53
                                              
 Argentina peso     8.0000        0.03        -18.84
 (interbank)                                  
                                              
 Argentina peso     10.31         2.33        -3.01
 (parallel)                                   
                                              
 
    
    

 (Reporting by Walter Brandimarte and Priscila Jordao; Editing
by Tom Brown)