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EMERGING MARKETS-Brazil stocks hit six-year high on Eletrobras privatization
August 22, 2017 / 11:34 PM / a month ago

EMERGING MARKETS-Brazil stocks hit six-year high on Eletrobras privatization

 (Updates with details from Mexico, quote from bank)
    By Bruno Federowski
    SAO PAULO, Aug 22 (Reuters) - Brazilian stocks on Tuesday
shot to a six-year high after the government unveiled plans to
privatize power utility Centrais Elétricas Brasileiras SA, while
Mexican shares rose after data showed the economy kept up steady
growth in the second quarter.
    Brazil's Bovespa stock index rose 2.0 percent,
topping the 70,000 mark for the first time since January 2011.
Common shares in Eletrobras, as the firm is known,
rose as much as 40 percent in their biggest daily advance since
1993.
    Late on Monday, Brazil floated a proposal to cede control of
the country's biggest power utility, the boldest privatization
yet amid a string of public asset sales and infrastructure
concessions. The deal could fetch up to 20 billion reais ($6.4
billion), an official said.
    In Mexico, the national statistics agency said the economy
grew by 0.6 percent quarter-on-quarter in the April-to-June
period, helping to lift the main stock index almost 0.2 percent.
    The growth was just a tenth of a point slower than in the
January-March period, offering the latest evidence that Latin
America's no. 2 economy is defying fears that U.S. President
Donald Trump's protectionist rhetoric could hurt activity.
    Most Latin American currencies rose, though the Mexican peso
 closed down slightly and the Brazilian real
slipped 0.4 percent as investors awaited a meeting of central
bankers in Jackson Hole, Wyoming, later this week.
    Federal Reserve Chair Janet Yellen on Friday is expected to
give fresh clues on the Fed plan to roll back the extraordinary
stimulus it introduced to fight the global financial crisis,
removing a key driver of demand for emerging market assets.
    Yellen's remarks would be "closely followed as latest U.S.
inflation data have been weak, creating uncertainty over the
Fed's intention to raise its benchmark rate again in the next
four months," lender Banco Base said in a note to clients.
    The Brazilian government's plan to privatize Eletrobras also
boosted demand for stock in other state-controlled companies,
led by those holding Eletrobras debt. Shares of lender Banco do
Brasil SA rose 4.4 percent, while oil company
Petróleo Brasileiro SA jumped 3.4 percent.
    "The transaction is good news for state-owned firms as a
whole. In particular, expectations of better management and
incoming funds (at Eletrobras) are good news for Banco do
Brasil," Lerosa Investimentos equity analyst Vitor Suzaki said.
    Analysts at Itaú BBA estimated the Eletrobras privatization
could generate "at least 40 billion reais" in value through
cost-cutting, asset sales and other optimization efforts. Still,
the transaction will face sharp political opposition, they said.
    The share move tightened the spread of preferred shares over
common shares to the smallest in a month as traders anticipated
higher dividend payouts after privatization.
    Key Latin American stock indexes and currencies at 2300 GMT:
 Stock indexes                                 daily %   YTD %
                                     Latest     change  change
 MSCI Emerging Markets               1072.52      0.83   24.38
 MSCI LatAm                          2856.72      1.14   22.05
 Brazil Bovespa                     70011.25      2.01   16.25
 Mexico S&P/BVM IPC                 51332.98      0.18   12.47
 Chile IPSA                          5114.69      0.25   23.20
 Chile IGPA                         25564.40      0.27   23.30
 Argentina MerVal                   22900.18     -0.29   35.36
 Colombia IGBC                      10959.04      0.25    8.20
 Venezuela IBC                     198024.39      1.07  524.58
                                                              
 Currencies                                    daily %   YTD %
                                                change  change
                                      Latest            
 Brazil real                          3.1810     -0.40    2.14
 Mexico peso                          17.666     -0.06   17.42
 Chile peso                           640.80      0.27    4.67
 Colombia peso                       2984.95      0.07    0.55
 Peru sol                              3.238      0.03    5.44
 Argentina peso (interbank)            17.21      0.32   -7.76
                                                        
 Argentina peso (parallel)             18.27     -0.11   -7.94
                                                        
 
 (Reporting by Bruno Federowski and Miguel Angel Gutierrez;
Editing by Clive McKeef)
  

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