August 8, 2011 / 3:35 PM / 8 years ago

EMERGING MARKETS-Investors dump Latam stocks on global fears

 * US debt downgrade, euro zone debt woes stoke sell-off
 * Investors dump global risk assets, run to safe havens
 * Brazil's Bovespa off 5.47 pct, Mexico's IPC off 3.11 pct  (Updates with midday trading)
 By Silvio Cascione and Luciana Lopez
 SAO PAULO, Aug 8 (Reuters) - Latin American stocks headed for their worst day in over a year on Monday as investors around the world fled riskier assets on fears U.S. and European debt crises would drag down global growth for years.
 The MSCI Latin America stock index .MILA00000PUS plunged 5.52 percent for what could be its worst day since February 2010.
 "It's hard to forecast anything, there are a lot of people calling in stops, and right now it's all on irrationality," said Jose Goes, an analyst with Win Trade, a division of Alpes Corretora.
 Markets have largely been in freefall over the past week. Although the United States managed to avoid a catastrophic default, U.S. legislators passed a budget package that stoked worries about hamstrung fiscal policy.
 Piling on, ratings agency Standard & Poor's then stripped the United States of its sterling AAA rating late on Friday, with Moody's warning on Monday of a similar downgrade. [ID:nN1E77700L]
 As if fragility in the world's biggest economy weren't enough, Spain and Italy came under investors' microscope as the latest euro zone nations to groan under heavy debt burdens. The European Central bank bought significant quantities of both countries' debt on Monday to try to lower yields. [ID:nL3E7J80LZ]
 "Despite benefiting from generally better fundamentals, no emerging market is immune from the deepening problems in the U.S. and Europe," the Capital Economics consultancy wrote in a Monday note to clients.
 Stocks tumbled around the world, with perceived safe havens such as gold soaring as investors fled riskier assets. [ID:nN1E77707J] and [ID:nL6E7J80CO]
 All in all, analysts said, there was little to cheer about.
 Slower global growth could likely hit Latin America by way of commodities, as a number of companies in the region are tied to the world trade in raw materials.
 In Brazil, common shares of mining giant Vale (VALE3.SA) fell 6.09 percent and its preferred shares VALE5.SA gave up 5.39 percent.
 Energy company Petrobras (PETR4.SA) plunged 5.7 percent as well.
 Brazil's benchmark Bovespa stock index .BVSP slid 5.47 percent and fell below 50,000 points for the first time since July 2009. The Bovespa was tracking its worst five-day stretch since October 2008, in the middle of global financial crisis.
 Also falling steeply were companies owned by billionaire Eike Batista. Their shares have lost billions in value over the past week alone. [ID:nN1E77329M]
 Among his holdings, oil and gas firm OGX Petroleo e Gas OGXP3.SA shed 9.36 percent and mining firm MMX Minerais e Metalicos (MMXM3.SA) 7.58 percent.
 Mexico's IPC .MXX sank 3.11 percent and was suffering its worst five-session stretch since January 2009 -- when markets were also worried about euro zone sovereign debt.
 Juan Jose Resendiz, head of analysis at Mexican brokerage Arka, said the IPC's next key support was at 32,500 points.
 Mexico is particularly dependent on the U.S. economy, sending about 80 percent of exports to its northern neighbor.
 Shares of America Movil (AMXL.MX), a major IPC weight and one of the biggest telecommunications companies in the world, sank 1.97 percent.
 Chile's IPSA .IPSA plunged 4.46 percent for what looks to be its worst five-day stretch since October 2008.
 Retailers were among stocks leading losses in Santiago, with Falabella FAL.SN down 4.82 percent and Cencosud CEN.SN 6.81 percent.  (Additional reporting by Brad Haynes in Sao Paulo and Michael O'Boyle in Mexico City; Editing by Dan Grebler)    

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