Latin American equities surged higher, as Brazil’s market extended its recent gains and Mexican shares established a fresh record closing high. Additionally, investors propelled Argentine stocks upward on legislation dealing with debt restructuring.
Brazil’s benchmark Bovespa Index jumped 268.27 points, or 1.09%, while Mexico’s benchmark Bolsa Index advanced 101.42 points, or 0.76%. Argentina’s Merval Index leapt 28.21 points, or 2.06%.
Brazilian shares rose for the second consecutive day, supported by unusually large gains in several key banking and power sector stocks.
São Paulo state power firms were among the largest advancers, on news the government of Brazil’s wealthiest state plans to privatize Transmissão Paulista, with the proceeds going to pay down debt for state-owned generator Cesp.
Separately, banking issues climbed on expectations that lending rates will increase this month and on hopes that some merger and acquisition activity may be in store for the sector.
Low-cost carrier Gol Linhas Aereas Inteligentes boosted the size of its 737-800 NG aircraft order with Boeing by 20 purchase options to 63 aircraft. Gol descended on the session.
Amid economic news, Sao Paulo’s Fipe consumer price index rose 0.56% in January, slower than the 0.67% gain in December. Analysts’ estimates ranged between 0.62% and 0.80%.
Elsewhere, Mexican shares closed at a record level on late buying, following an early bout of profit taking.
The market has repeatedly hit record highs during the past four sessions, although traders noted that it continues to be volatile.
Shares of phone carrier Telmex and financial group Inbursa, both scheduled to report earnings after the close, advanced.
On the research front, a major investment house raised its year-end price target on America Movil to US$60 from US$55 previously.
Also, the investment house lifted its revenue outlook for Latin America’s biggest wireless services provider by 6%, citing higher subscriber growth in nearly all countries as the primary driver for revisions.
Homebuilder stocks never recovered from initial losses. An influential brokerage downgraded Mexican homebuilders Urbi Desarrollos Urbanos SA and Consorcio Ara to “neutral 2” from “buy 2,” in the wake of the recent surge in the companies’ shares.
However, the brokerage increased its 12-month price target on Urbi, which remains its top pick in Mexico’s housing sector, to 70 pesos from 67 pesos.
Also, Corporacion Geo was kept at a “neutral 2” rating, although its price target was lifted to 30 pesos from 18.10 pesos.
The analyst explained the downgrades were “based more on the stocks’ recent rally and on the group’s absolute level of valuation, especially when compared to homebuilders around the world.”
In other news, Mexico’s consumer confidence continued to improve in January, advancing to 105.2 last month from 95.9 the year before and 102.8 in December, according to the National Statistics Agency, or Inegi.
Meanwhile, Argentine equities rallied, as investors bet that the government will succeed in its latest attempt to convince undecided creditors to participate in the country’s massive US$ 103 billion debt restructuring.
Economy Minister Roberto Lavagna in a surprise news conference last night introduced legislation legally prohibiting any debt swap sweeteners, which would forbid the executive branch from changing or reopening the six-week debt restructuring which closes on February 25.
The message the government intends to convey is that there is no way there will be another opportunity for these bondholders to liquidate their holdings of defaulted debt.
Argentina’s national statistics agency, INDEC, said its consumer price index increased 1.5% in January from December and is now running at a 7.2% rate year-over-year.
The reading is the highest monthly inflation rate since August 2002 and puts pressure on the central bank to tighten monetary policy and allow the Argentine peso to rise.
Thomson Financial Corporate Group