EMERGING MARKETS-Latam markets sink on Ukraine, China worries

Tue Apr 15, 2014 4:55pm EDT

(Recasts; adds quotes, context on Petrobras; updates prices)
    By Asher Levine
    SAO PAULO, April 15 (Reuters) - Latin American stocks and
currencies dropped on Tuesday, with investor concerns over
escalating tensions in Ukraine and potentially weaker growth in
key trade partner China sapping enthusiasm for emerging market
assets.
    The MSCI Latin American stock index posted
its biggest one-day drop in nearly three months, while nearly
every currency in the region weakened against the U.S. dollar.
    Demand for higher-risk investments fell across the board
after Ukraine said an "anti-terrorist operation" against
pro-Moscow separatists was under way and Russia declared Ukraine
on the brink of civil war. 
    The mood darkened further after data on Tuesday showed
China's money supply grew at the weakest pace in more than a
decade in March. The numbers are a sign of softening economic
momentum in Brazil's top trading partner, a key purchaser of
Latin American raw materials such as iron ore, soybeans and
copper. 
    China will release its first-quarter growth data on
Wednesday at 0200 GMT.
    Brazil's Bovespa stock index posted its biggest
intraday loss in over ten weeks, as shares of commodities firms
such as iron ore exporter Vale SA, which counts China
as its biggest customer, sank. 
    Preferred shares of Petroleo Brasileiro SA, known as
Petrobras, slid 3.8 percent as Chief Executive
Officer Maria das Gra├žas Foster testified to Brazil's Congress
on the controversial purchase of a Texas refinery in 2006. Some
critics are trying to tie the transaction, which they see as
drastically overpriced, to a widening corruption scandal at the
state-run oil company. 
    Some analysts, however, see a silver lining for the stock.
    "Looking into the facts will improve (Petrobras') situation
in the future," said Joao Pedro Brugger, an analyst with Leme
Investimentos in Florianopolis. "It suffered in recent years
with bad management, including the investigations that are
happening now. Maybe things could improve from here on out."
    Brazilian stocks caught the attention of global investors
last month following a two-week, 15 percent rally fueled by
rising risk appetite and heightened expectations for a shift in
economic policy following October's presidential election.
    "We saw the market rising a lot last month mostly on flows,
but the fundamentals didn't change," Brugger added. "We are
seeing a slight pullback and the China data will be key in
determining whether the market will hold here or not."
    Elsewhere in Latin America, Mexico's IPC stock index 
pared early losses, while Chile's IPSA index gave up
most of the previous session's gains.
    The region's currencies also weakened, with Brazil's real
 dropping about 1 percent against the dollar and Mexico's
peso slipping 0.6 percent.
    "At the very least the market remains nervous going into
tonight's (China) GDP print," wrote Dirk Willer, managing
director for emerging markets strategy at Citi in New York.
    Chile's peso weakened about 1.1 percent against the
dollar after government copper commission Cochilco reduced its
global outlook for copper prices, the country's main
export. 
    
    Key Latin American stock indexes and currencies at 2021 GMT:
    
 Stock indexes           Latest      Daily pct  YTD pct
                                     change     change
 MSCI Emerging Markets      999.32   -1.23       0.9
                                                
 MSCI LatAm               3,209.63   -2.42       2.76
                                                
 Brazil Bovespa          50,454.35   -2.21      -2.04
 Mexico IPC              40,481.8    -0.12      -5.25
 Chile IPSA               3,877.49   -0.41       4.82
 Chile IGPA              19,010.29   -0.3        4.30
 Argentina MerVal         6,327.27   -1.11      17.37
                                                
 Colombia IGBC           13,808.32   -1          5.64
 Peru IGRA               14,619.67   -1.01      -7.20
 Venezuela IBC            2,472.45    0.67      -9.65
                                                
 Currencies              Latest      Daily pct  YTD pct
                                     change     change
 Brazil real             2.2335      -1.04        5.52
 Mexico peso             13.105      -0.63       -0.57
 Chile peso              555.8       -1.13       -5.34
 Colombia peso           1,934.63    -0.49       -0.14
 Peru sol                2.782        0.00        0.40
 Argentina peso          8.0000       0.03      -18.84
 (interbank)                                    
 Argentina peso          10.37       -0.87       -3.57
 (parallel)                                     
 
 (Additional reporting by Bruno Federowski; editing by G Crosse
and; Andrew Hay)
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