Latin American shares weakened, amid concerns over higher interest rates. Brazil’s central bank was widely expected to boost rates after the market’s close, while Federal Reserve Chairman Alan Greenspan’s comment that U.S. interest rates still remain “fairly low” spurred consideration regarding monetary policy tightening in that nation.
Brazil’s benchmark Bovespa Index fell 226.04 points, or 0.85%, while Mexico’s benchmark Bolsa Index slid 55.15 points, or 0.40%. Argentina’s Merval Index rose 14.88 points, or 1.00%.
Brazilian issues weakened, on expectations Brazil’s central bank would hike the base Selic interest rate by at least 50 points to 18.75% after the market’s close in an effort to stem Brazil’s stubborn inflation.
Some investors worried that the bank could raise interest rates by as much as 75 basis points to 19%. Following trading hours, the central bank’s monetary policy committee (Copom) raised rates to an annual 18.75% from 18.25%.
In earnings news, Brazilian petrochemicals giant Braskem SA acknowledged that its fourth-quarter net earnings dipped sequentially to 487 million reais from 496 million reais in its third quarter, causing the stock to fall. Still, Braskem’s 2004 net profit spiked 221% to 691 million reais from the previous year.
Turning to research notes, a major investment house downgraded Banco Bradesco to “neutral-2” from “buy-2,” stating that the market has already priced in favorable views regarding Brazil’s largest private bank. Sellers were active on the news.
Separately, Mexican equities fell, as investors booked additional profits following the market’s extended rally. After some profit taking Monday followed by a rebound Tuesday, the benchmark IPC index is still close to record levels, supported by solid fourth-quarter earnings news.
Homex SA fell, even though the Mexican home construction firm said its fourth-quarter profits more than doubled. Homex posted an operating profit that climbed to 467.3 million pesos from 203.2 million pesos a year earlier, as net earnings leapt to 126.3 million pesos from 61.2 million pesos.
The company’s sales increased to 2 billion pesos from 1.2 billion pesos one year prior. Still, an analyst commented that Homex “showed continued strong year- on-year growth; however, the results were still nearly 10% shy of our estimates at the operating level.”
Mexican airport operator Asur reported that its passenger traffic increased 12% year-on-year in the fourth quarter as sales for aeronautical services climbed 23%, driving its quarterly profits higher. Asur shares rose.
In other news, Mexican fast food chain operator Alsea SA was cut to “neutral” from “buy,” with the analyst citing “concerns about the company’s move into unproven franchises and the tying up of capital in real estate.” Still, the analyst raised its 12-month price target on the stock to 27.40 pesos from 24.30 pesos.
On the economic front, Mexico’s gross domestic product rose 4.9% in the fourth quarter from the year-earlier period, marking the fastest growth in four years and the strongest economic performance since President Vicente Fox took office in late 2000. Analysts had estimated GDP would expand by 4.7%, on average. The fourth-quarter result brought full-year GDP growth to 4.4%.
Meanwhile, Argentine stocks recovered somewhat from yesterday’s decline, in spite of Thursday’s impending options contract expiration date, an event that traditionally generates volatility and also weighs on prices.
Earlier, Argentina informed Italian regulator Consob that the participation in its ongoing US$103 billion debt swap offering had reached US$37.86 billion as of February 11. However, the country provided no additional information and therefore no means to calculate a participation rate.
Thomson Financial Corporate Group