June 30, 2020 / 8:27 PM / 10 days ago

EMERGING MARKETS-Brazil stocks record best quarter since 2003; Real falls

    * Brazil's real down nearly 5% for Q2
    * Brazil stocks set to outperform broader EM in Q2
    * Argentine peso among worst Q2 performers

 (Adds background, updates prices)
    By Ambar Warrick and Shreyashi Sanyal
    June 30 (Reuters) - Brazil's real led Latin American
currency losses on Tuesday on a raft of weak data, while the
country's stocks were set for the best quarter in 16-1/2 years
as investors sought better returns in equities.
    The real fell 0.6%, on track to lose nearly 5%
for the second quarter, right after its worst quarterly loss in
nearly 17 years.
    The currency, once considered a viable option for carry
trade, saw its standing slowly slip this year on continued
interest rate cuts by Brazil's central bank and uncertainty over
the coronavirus pandemic.
    Conversely, Brazilian stocks were set to add 30% for
the quarter, their best performance since 2003, as they
recovered from sharp losses in the prior quarter. 
    The Bovespa index was set to outperform a 17% rise in its
broader emerging market peers for the quarter. 
    "The lower returns from sovereign fixed-income instruments
have forced investors out of their traditional comfort zone of
higher-yielding government bonds and into riskier assets, and
this has been a major factor in the resilient domestic equity
market in Brazil," wrote Wilson Ferrarezi, Brazil Economist at
TS Lombard. 
    For the day, stocks fell about 0.3% after data showed
Brazil's national debt and government deficit hitting record
highs in May. Separate data showed the country's unemployment
rate hitting a two-year high.
    Other Latin American risk assets also fell, as a spike in
coronavirus infections in the developed world raised concerns
over new curbs on social and business activity.
    Mexico's peso fell 0.5%, tracking weakness in oil
prices. Still, the currency was set to add about 2.3% for the
quarter.
    Mexican stocks dropped about 0.5%, but were set for
their best quarter since 2011.
    Chilean stocks traded flat, while Colombian
equities shed 0.2% as both markets resumed trade after
a long weekend.
    Colombia's peso weakened as the country's central
bank cut its benchmark interest rate by 25 basis points to 2.5%
and announced further liquidity measures to cope with low oil
prices and the pandemic.
    Argentina's peso was among the worst quarterly
performers in Latin America, as investors continued to fret over
the country's negotiations with its sovereign debt holders.
    
    Key Latin American stock indexes and currencies at 2008 GMT:
    
 Stock indexes         Latest      Daily %
                                   change
 MSCI Emerging           996.57         0.26
 Markets                         
 MSCI LatAm             1884.89        -0.16
                                 
                                 
 Brazil Bovespa        95774.78         0.04
                                 
 Mexico IPC            37715.04        -0.14
                                 
 Chile IPSA             3959.26        -0.79
                                 
 Argentina MerVal      38609.52       -4.214
                                 
 Colombia COLCAP        1111.80          0.1
                                 
                                            
    Currencies         Latest      Daily %
                                   change
 Brazil real             5.4491        -0.19
                                 
 Mexico peso            22.9936         0.29
                                 
 Chile peso               820.9        -0.18
                                 
 Colombia peso          3754.75        -0.22
                                 
 Peru sol                3.5408        -0.37
                                 
 Argentina peso         70.4500        -0.07
 (interbank)                     
                                 
 Argentina peso             122         5.74
 (parallel)                      
                                 
 
 

 (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru;
Editing by Sandra Maler and Richard Chang)
  
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