EMERGING MARKETS-Brazil's Bovespa flirts with 60,000, real gains on election bets

Tue Aug 26, 2014 12:11pm EDT

SAO PAULO, Aug 26 (Reuters) - Brazil's Bovespa stock index
 briefly touched its highest level in more than a year
and a half on Tuesday, driven by rising expectations that
President Dilma Rousseff could lose her bid for re-election in
October, although the market edged lower later in the session as
investors took profits.
    The broader MSCI Latin American stock index 
rose for the eighth session in nine, while most of South
America's currencies strengthened.
    Brazil's stock market has rallied for nearly two weeks as
electoral polls showed a surge of support for opposition
candidate Marina Silva that made it near certain that Rousseff
would not win an outright re-election on Oct. 5.
    Many investors have criticized Rousseff for mismanagement of
the economy and for enacting policies detrimental to minority
shareholders of state-run companies such as oil producer
Petroleo Brasileiro SA, known as Petrobras.
    Preferred shares of Petrobras have risen more than 20
percent over the past eight sessions and briefly traded at their
highest price in nearly two and a half years on Tuesday before
settling slightly lower in the afternoon.
    "Investors in Brazil remain focused on presidential
elections and its potential impact on equities," Bank of America
Merrill Lynch analyst Felipe Hirai wrote on Tuesday. "As recent
polls indicated Marina Silva could be a very competitive
candidate, even beating incumbent President Dilma in an eventual
2nd round, the market seems to be increasing the chances of an
opposition-winning scenario."
    The next electoral poll is expected to be released later on
Tuesday, followed by another on Wednesday, and investors are
betting they will show Rousseff losing ground.
    Bank shares also weighed on the Bovespa index after data
showed growth in loan books slowed for a sixth straight month in
July while delinquencies rose. 
    In currency markets, the Brazilian real strengthened
against the dollar following four straight days of declines.
    Traders said expectations for the polls helped support the
real, as a non-Rousseff government would likely reduce the
country's risk profile among global investors. 
    Elsewhere in Latin America, the Colombian and Mexican pesos
  both gained about 0.35 percent against the dollar. 
    Colombia's central bank will likely raise interest rates for
a fifth straight month on Friday as policymakers see the economy
having reached its potential growth level, according to a
Reuters survey on Monday. 
    
    Key Latin American stock indexes and currencies at 1543 GMT:
    
 Stock indexes                             daily %     YTD %
                               Latest       change    change
 MSCI Emerging Markets           1087.52      0.21      8.24
                                                    
 MSCI LatAm                      3564.22      0.09     11.25
                                                    
 Brazil Bovespa                 59562.25     -0.29     15.64
                                                    
 Mexico IPC                     45610.85      0.23      6.75
                                                    
 Chile IPSA                      3956.24      0.27      6.95
                                                    
 Chile IGPA                     19263.32      0.22      5.69
                                                    
 Argentina MerVal               9393.149      0.11     74.24
                                                    
 Colombia IGBC                  14404.08      0.01     10.20
                                                    
 Peru IGRA                      17023.15     -0.04      8.06
                                                    
 Venezuela IBC                   2572.17     -0.03     -6.01
                                                    
                                                            
 Currencies                                daily %     YTD %
                                            change    change
                                  Latest            
 Brazil real                      2.2723      0.78      3.72
                                                    
 Mexico peso                     13.1032      0.34     -0.56
                                                    
 Chile peso                        585.5     -0.44    -10.15
                                                    
 Colombia peso                   1926.49      0.43      0.29
 Peru sol                          2.832      0.07     -1.38
                                                    
 Argentina peso (interbank)       8.4050      0.00    -22.75
                                                    
 Argentina peso (parallel)            14     -0.14    -28.57
                                                    
 
    

 (Reporting by Paula Laier and Bruno Federowski; Writing and
additional reporting by Asher Levine; Editing by Grant McCool)
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