Mexico stocks rise on telecoms, bonds gain

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MEXICO CITY, Aug 20 (Reuters) - Mexican stocks rose on Wednesday, led by gains at telecommunications companies, while bonds firmed as investors bet the country's central bank is unlikely to further hike interest rates this year.

The IPC stock index .MXX closed 0.5 percent higher in low-volume trading at 26,865.04 points, while the peso MXN= MEX01 firmed 0.2 percent at the central bank's final 1:30 p.m. (1830 GMT) reference to 10.1375 per dollar.

The government's benchmark 10-year peso bond MX10YT=RR rose 0.247 of a point in price to bid 94.807, pushing its yield down 4 basis points to 8.56 percent.

Strong quarterly results from Hewlett-Packard (HPQ.N) triggered a rally in U.S. technology stocks that analysts said helped lift Mexican telecommunication companies.

"Hewlett-Packard reported really well. ... This helped a lot," said Sandra Tinoco, an analyst at Monex brokerage firm in Mexico City.

Traders said investors were looking for bargains after Mexico's stock market lost around 16 percent since the beginning of June.

Shares of America Movil (AMXL.MX), Latin America's largest cell phone operator, gained 1.72 percent to 26.01 pesos while its New York traded stocks (AMX.N) added 1.53 percent to $51.26.

Telmex Internacional (TELINTL.MX), the new company of South American telecommunications assets recently spun off from fixed line giant Telmex, jumped 4.84 percent to 7.15 pesos, its biggest one-day rise since debuting in early June.

Telmex Internacional's New York stock (TII.N) climbed 4.63 percent to $14.

Miner Grupo Mexico held onto early gains on rising copper prices even after prices for the red medal slid. Its shares (GMEXICOB.MX) added 3.68 percent to 16.32 pesos, as the stock recovers from a 16-month low hit last week.

In the debt market, traders said gains in bonds were driven by expectations that the central bank has finished tightening borrowing after raising interest rates last week for the third time in an many months.

"There are people who think that there will not be another adjustment," said one bond trader in Mexico City.

Traders said recent drops in commodity prices were backing expectations that inflation, which is running at its fastest pace in more than three years, would cool and take pressure off the central bank.

Currency traders said the peso gained as oil prices rose -- Mexico is the world's No. 6 producer -- and as U.S. Treasury yields fell on worries about the health of the financial system in the United States.

That made relatively high-yielding Mexican debt more attractive to investors. (Reporting by Michael O'Boyle; Editing by Diane Craft)