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EMERGING MARKETS-Latam stocks plunge on global woes
September 22, 2011 / 9:57 PM / 6 years ago

EMERGING MARKETS-Latam stocks plunge on global woes

* Global recession fears provoke sell-off

* Brazil Bovespa off 4.83 pct, Mexico IPC down 4.82 pct (updates with closing prices, adds backgroung, quotes)

By Rachel Uranga

MEXICO CITY, Sept 22 (Reuters) - Latin American stocks sank on Thursday to two-year lows as gloomy data from China, Europe and the U.S. stoked investor fears that a global recession loomed.

The MSCI Latin American stock index .MILA00000PUS plummeted 6.61 percent, its lowest since September 2009.

“It’s people everywhere, selling everything that smells of risk,” said Patricia Berry, a strategist at brokerage Intercam in Mexico. “It’s fear of a possible recession and it’s fear because nothing is being decided by authorities in Europe or the U.S.”

Investors shed emerging market assets as data showed sharp declines in private sector activity in Europe and China along with high jobless claims in U.S. reinforced global slowdown fears. [ID:nL5E7KM1AQ] Together those economies are responsible for 60 percent of the world output.

Market players had already been disappointed by the U.S. Federal Reserve decision late Wednesday to cut long-term borrowing rates by shifting holdings of U.S. Treasury debt into longer-term bonds. Investors saw the move dubbed “Operation Twist,” as not enough to starkly improve the economy.

“There’s been a lot of answers and solutions that they have talked about,” Berry said. “But nobody wants to seem to adopt them. There doesn’t seem to be many options.”

Without a clear direction on the looming crisis in Europe and a stubbornly sluggish U.S. economy, markets remain on edge, she said, suggesting shares could slip even further.

A European Central Bank study warned on Thursday the euro currency project was in danger and earlier in the week, the IMF lowered global growth projections.

Highlighting the depths of the crisis, seven world leaders on Thursday demanded Europe act more swiftly to stem the debt crisis just as G20 finance ministers got ready to discuss the troubles. [ID:nL5E7KM2XQ]

Investors already nervous about euro zone sovereign debt troubles are not convinced that recent measures taken by Greece are enough to prevent it from defaulting.

“If there is a Greek default, who knows what may happen,” said Pedro Galdi, an analyst with SLW brokerage. “Volatility is sure to continue.”

Meanwhile, the slowdown in China and the U.S. could hit Latin America hard. Mexico sends most of its exports to its northern neighbor, the United States, and China is Brazil’s biggest trading partner, consuming huge quantities of soy and iron ore exports.

Brazil's benchmark Bovespa stock index .BVSP sunk 4.83 percent to 53,280. A bearish cross by the Bovespa's MACD trend indicator signaled an end to its roughly 20-percent rally since mid-August.

Commodities companies led losses, with preferred shares of mining giant Vale (VALE5.SA) off 4.30 percent and common stock (VALE3.SA) down 5.31 percent. Vale, the world’s largest producer of iron ore, counts China as its single biggest customer.

State-controlled oil company Petrobras (PETR4.SA) slid 5.34 percent and rival OGX (OGXP3.SA) lost 6.61 percent as crude oil CLc1 plunged in New York.

Mexico's IPC index .MXX fell 4.82 percent, headed for its biggest one-day drop in more than two weeks. The index touched its lowest point in more than a month.

Shares of America Movil (AMXL.MX), one of the world’s biggest cell phone companies by number of subscribers, lost 4.96 percent while Mexico’s leading retailer Walmex WALMEXV.MX retreated 4.51 percent.

Miner Grupo Mexico (GMEXICOB.MX) dropped 5.5 percent.

Chile’s IPSA .IPSA fell 5.47 percent to 3,824. The IPSA’s next clear support is below 3,800 points, where the index rebounded from its August plunge at a 14-month low.

Falabella FAL.SN dropped 5.1 percent, with fellow retailer Cencosud CEN.SN down 4.0 percent. (Aditional reporting by Asher Levine in Sao Paulo; Editing by Diane Craft)

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