Monday, March 13, 4:45 PM EST (Thomson Financial): Latin American stocks
were mixed, with Brazilian shares slumping, as investors continued to eye
rising U.S. Treasury yields. Meanwhile, Mexican and Argentine issues climbed
on bargain hunting following recent losses.
Brazil's Bovespa Index shed 97.71 points, or 0.26%. Mexico's benchmark
Bolsa Index jumped 286.02 points, or 1.55%, while Argentina's Merval Index
rose 8.49 points, or 0.48%.
Brazilian stocks dipped, extending last week's losses, amid continued
concerns about rising U.S. Treasury yields, which reflect expectations for
further U.S. interest rate hikes. Recent hawkish comments from Federal Reserve
officials have fueled concerns that the U.S. monetary tightening cycle may
continue longer than previously expected. Higher U.S. interest rates tend to
draw investment away from emerging markets like Brazil.
However, shares rose earlier in the session, as positive forecasts in the
central bank's weekly market survey added to optimism about the outlook for
local interest rates. Economists and analysts polled in the bank's weekly
market survey released today once again lowered their forecasts for 2006 year-
end inflation as measured by the official IPCA index and maintained their
estimates for the benchmark Selic base interest rate. Analysts reduced their
forecast for 2006 IPCA inflation to 4.55% from 4.56% in the previous survey.
They also maintained their year-end 2006 forecast for the benchmark Selic base
interest rate at 14.5% per year. The rate currently stands at 16.5% per year.
In addition, the survey put 2006 economic growth at 3.7%, up from 3.5% the
previous week.
In corporate news, an influential investment bank upgraded Brazil's
largest Internet provider Universo Online to "neutral" from its previous
"sell," saying "large underperformance has significantly improved its relative
valuation."
Elsewhere, Mexican stocks rallied, as investors snapped up discounted
shares following a bout of heavy profit taking last week.
In corporate news, broadcaster Televisa reiterated that it has not yet
made a decision on whether to participate in a bid for U.S. Spanish-language
broadcaster Univision Communications Inc. Televisa was responding to recent
news reports about its potential participation in a purchase of Univision.
Meanwhile, a major investment bank upgraded brewer Grupo Modelo SA to
"overweight" from "equalweight," citing "favorable risk reward." Modelo's
stock shot higher on Friday following news that the company won an arbitration
proceeding with U.S. importer Gambrinus Co., enabling its contract with
Gambrinus to end this year. "We think there is more room to go as the market
moves toward our above-consensus 2007 view on Modelo's earnings," the
investment bank said.
Argentine issues climbed, after falling recently on bargain hunting amid a
winding down of Argentina's corporate earnings season. In local economic news,
the national statistics agency said the Argentine unemployment rate was 10.1%
in the fourth quarter, down from 11.1% in the third quarter and confirming
preliminary data released two weeks ago.
On the corporate front, a major investment bank started steel producer
Ternium at "overweight" on valuation. "We see considerable value in Ternium,"
the bank said.
-- Paul.Davee@thomson.com; Thomson Financial Corporate Services
This is Thomson Financial Corporate Services Latin American Commentary.
The information herein is believed to be true and accurate, we take no
responsibility for inaccurate information and reserve the right to update our
reports. If you have any questions please e-mail James Sang at
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SOURCE Thomson Financial Corporate Group
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