Brazilian and Latin American bourses fell on profit taking this Friday. In the U.S., the broad market’s gains were limited by inflation concerns following data showing a bigger-than-expected rise in core producer prices.
Brazil’s benchmark Bovespa Index dropped 334.66 points, or 1.24%, while Mexico’s benchmark Bolsa Index ebbed 11.77 points, or 0.09%. Argentina’s Merval Index surged 25.91 points, or 1.69%.
Brazilian stocks declined on a rush of profit taking, after the market reached an all-time closing high on Thursday. Traders noted that it was primarily domestic investors who were booking profits following gains in recent session.
Analysts also highlighted investor concern over long-term monetary policy. After its interest rate hike earlier this week, market watchers will be looking towards the release of central bank minutes from its February meeting next Thursday.
Analysts said many market participants will assume a cautious stance toward investing next week as they await the tone and content of the minutes, which should shed light on potential upcoming interest rate hikes.
Shares of Telesp Celular Participações SA tumbled, after the firm said it added 1.27 million customers during the fourth quarter, below year-ago levels, and its loss deepened on slightly higher revenue.
The Brazilian mobile phone operator suffered a loss of 234.7 million reais, compared with a deficit of 177.5 million reais one year before, as it spent more to maintain market share and financial expenses leapt. Still, net revenues solidified to 1.95 billion reais from 1.88 billion reais.
Turning to research news, a major investment house cut its stock ratings on Brazilian banks Banco Bradesco to “sell” from “hold” and Banco Itaú to “sell” from “buy,” based on high valuations and the increased risk of investing in Brazilian equities.
The investment house also maintained its “sell” recommendation on major Brazilian bank Unibanco. Still, it boosted target prices on the three banks.
Elsewhere, Mexican issues slipped as investors logged profits amid local currency gains, with the peso’s advance continuing against the U.S. dollar. Still, a late advance in the U.S. market held losses to a minimum.
The peso finished at its highest level since March 2004, with one analyst attributing the currency’s rally this week to fourth-quarter and 2004 economic growth that exceeded expectations, as well as to a temporary widening of domestic interest rate spreads. A stronger peso increases the relative dollar value of shares.
On the corporate front, TV Azteca’s director of investor relations said the firm expects 2005 results to be “similar” to last year, even without another event like the Olympics to drive sales.
Mexico’s largest brewer, Modelo, said it expects to post more than 12% growth in fourth-quarter operating earnings, while favorable tax changes will enable net profit to rise by more than 35%. In the fourth quarter of 2003, Modelo recorded operating earnings of 2.58 billion pesos and a net profit of 1.11 billion pesos on sales of 10.39 billion pesos.
Meanwhile, Argentine stocks climbed, on another day of strong volume. The bulk of activity was in options trading, as a quarterly contract expiration date falls this week.
Traders stated that investors selling shares to have liquidity to exercise call options found plenty of eager buyers, stemming from optimism over the final acceptance rate for Argentina’s US$ 103 billion debt restructuring.
Also, for the second session in a row, Argentina’s stock exchange extended trading to compensate for technical difficulties.
Separately, Venezuelan equities fell. Venezuela’s largest telecommunications firm, CANTV, reported that its fourth-quarter earnings fell to US$ 19 million from US$ 42 million in the corresponding period a year prior.
However, full-year net earnings leapt to US$ 160 million from US$ 18 million in 2003. Following the news, a major brokerage downgraded CANTV to “neutral” from “buy,” remarking that the company’s free cash flow and dividend outlook is unlikely to adequately compensate investors for the country’s risk.
Thomson Financial Corporate Group
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