MEXICO CITY, Dec 27 (Reuters) - Latin American stocks rose on Friday and could be in for a rally based on technical signals and data that showed stronger flows into funds focused on the region’s stocks.
Outflows from Latin American-focused stock funds tracked by Lipper, a Thomson Reuters company, saw record outflows this year, and the region’s equities could be poised for a rebound.
Emerging market stocks took a beating when the U.S. Federal Reserve first started talking about cutting its massive stimulus earlier this year. Now the Fed has signaled it will reduce the pace of stimulus but keep interest rates low. That may push investors, flush with cash, back into emerging stocks in the new year. For related analysis, see
* The MSCI Latin American stock index rose 0.5 percent on Friday, but it is still heading for a nearly 3 percent loss this month and it is down about 15 percent this year compared to an emerging market index that is down only about 5.5 percent.
* The deep slump is due to Brazil, where stocks have been hurt by sluggish growth, high inflation and concerns about a credit rating downgrade. The Bovespa index hit a four-year low hit back in July and has since mounted only a tentative rebound.
* Lipper data showed on Thursday that flows into U.S.-based Latin American focused stock funds rose $29 million in the week ending Dec. 25, registering only the second weekly inflow since mid-September.
* Weekly outflows outnumbered inflows more than two-to-one this year as investors pulled $5.2 billion out of Latin American funds tracked by Lipper, the biggest yearly outflow recorded.
* Expectations that tighter U.S. monetary policy would draw global investment out of emerging markets hurt Latin American stocks this year, but concerns about an economic slump in Brazil also weighed.
* Brazil’s benchmark Bovespa stock index has been little changed in thin holiday trading since last week. It edged up on Friday by 0.09 percent to 51,266.56 points. The gauge has failed to break past a technical resistance level at 51,600 points, but if the Bovespa can advance past it soon, it may rise further.
* Analysts think Brazilian multinationals and commodities exporters could benefit from weakness in the real currency that is expected due to less Fed stimulus. A weak real translates into higher profits from exports.
* Mexico’s IPC index rose 0.5 percent to 42,753.22 percent, peaking past the 42,500 level. The index had already failed to break decisively through that level on two previous attempts since the end of November.
* The 42,500 level coincides with the two-thirds retracement of the IPC’s January to June slump. A clean break higher in the coming sessions could point to another rally of about 7 percent back to January’s record high.