EMERGING MARKETS-Latam stocks muted after three-day rally, Brazilian real gains

      Brazil's economy to remain weak in 2023- poll

      Mexico's economy shrinks in Nov from Oct

      Sri Lanka holds interest rates

      Latam stocks flat, currencies up 0.5%

    By Amruta Khandekar
       Jan 25 (Reuters) - Latin American stocks were muted on
Wednesday after a three-day rally while the Brazilian real hit
an about one-week high even as concerns about a slowdown in the
country's economic growth linger.
    The MSCI's index for Latin American stocks
was flat at 1425 GMT. Brazil's Bovespa index fell 0.6%,
dragged down by a fall in shares of state-run oil firm Petrobras
 and financial stocks. 
    The Latam currencies index rose 0.5%, with
the Brazilian real last up 0.4% against the dollar
and rising for the second straight session.
  The currency of Latam's largest economy has gained 3.4% so far
in 2023 against a 4.1% annual gain in the broader regional
currencies index.
    Brazil's slowing economy will likely remain weak in 2023, a
Reuters poll of economists found, with markets concerned that a
new wave of planned spending by newly-elected President Luiz
Inacio Lula da Silva could put Brazil's debt on an even more
unsustainable path and stir inflation.
    "The feeling that the Fed's hiking cycle is soon approaching
the end and China’s relaxation of Covid sanitary barriers have
both triggered a risk-on mood, allowing the BRL to follow other
currencies and appreciate against the USD," Rabobank strategists
Mauricio Une and Renan Alves wrote in a research note.
    "However, going forward, fiscal fundamentals, particularly
debt sustainability, continue to be fragile and discussions
about a new fiscal framework will still bring currency
volatility over the course of 2023."
    Top copper exporter Chile's peso and the Peruvian sol
 fell about 0.5% each as prices of the red metal weakened.

    The Mexican peso was down 0.2%. The country's economy
shrank 0.5 percent in November from October and expanded 3.3
percent from November of 2021, the national statistics agency
said on Wednesday.
    Both Brazil and Mexico posted higher-than-expected inflation
numbers on Tuesday.
    Elsewhere, Sri Lanka's central bank held interest rates
steady for a third straight meeting on Wednesday, as widely
expected, saying the prevailing tight monetary stance is crucial
to taming still-high inflation and restoring economic stability.
    Among central and eastern European currencies, the Hungarian
forint rose 0.3% against the euro while the Polish
zloty fell 0.2%.  
    Polish rate-setter Ludwik Kotecki said he sees scope for
some small interest rate hikes this year but doesn't believe the
Monetary Policy Council will decide to raise them.
    EM is poised to outperform as an asset class in the months
ahead though there are challenges including weaker global
activity, according to Mitul Kotecha, head of emerging markets
strategy at TD Securities.
    Key Latin American stock indexes and currencies at 1425 GMT:
   Stock indexes            Latest        Daily % change
 MSCI Emerging Markets       1039.60                     0.04
 MSCI LatAm                  2318.06                      0.1
 Brazil Bovespa            112438.55                    -0.52
 Mexico IPC                     0.00                        0
 Chile IPSA                  5252.43                    -0.08
 Argentina MerVal          251006.80                   -0.437
 Colombia COLCAP             1310.50                     -1.6 Currencies           Latest        Daily % change
 Brazil real                  5.1174                     0.44
 Mexico peso                 18.8240                    -0.23
 Chile peso                    804.2                    -0.47
 Colombia peso               4482.31                    -0.30
 Peru sol                     3.9087                    -0.52
 Argentina peso             184.9900                    -0.16
 Argentina peso                  377                     1.06
 (Reporting by Amruta Khandekar in Bengaluru;Editing by Elaine