Latin American markets lacked a clear direction, as Brazilian shares continued to sink on profit taking. Mexican equities finished barely higher, while Argentine stocks rebounded following encouraging comments from President Kirchner regarding the end of the country’s debt swap.
Brazil’s benchmark Bovespa Index fell 409.15 points, or 1.45%, while Mexico’s benchmark Bolsa Index added 15.31 points, or 0.11%. Argentina’s Merval Index surged 39.76 points, or 2.55%.
Brazilian issues continued to descend, on continued profit taking by domestic investors. Many analysts said professional overseas funds have now mostly completed the work of rebuilding Brazilian portfolios for 2005.
Investors are concerned about the impact of recent advances in U.S. Treasury bond rates on Brazilian markets, as Brazil competes with the U.S. for investment dollars.
Investors largely overlooked the release of gross domestic product figures for 2004. The government announced that GDP grew 5.2% last year, but the fourth-quarter increase of 4.9% marked a slowdown from 6.1% in the third quarter.
Analysts noted that while the full-year result was within estimates, the fourth-quarter number may be an indication that Brazil’s economic recovery has peaked, with additional economic growth only possible if there are heavy new investments in infrastructure and industry.
In earnings news, Companhia Siderurgica Nacional SA reported that its fourth-quarter consolidated net earnings surged to 530.5 million reais from 315 million reais in the corresponding period a year before on net revenues that hit 2.59 billion reais, up from 2.02 billion reais.
Brazil’s largest integrated flat-steel producer lauded robust steel prices at home and abroad for the results. However, earnings slid from the third quarter as sales volumes dropped in the U.S. and Brazil.
Shares of Petrobras dropped, following a local newspaper report that Brazil’s tax authority slapped a 3 billion reais fine on the state-run oil giant for not paying taxes when renting offshore oil rigs outside the country.
Elsewhere, Mexican shares firmed, on the heels of profit taking yesterday. Shares of Mexican beverage firms Femsa and Coca-Cola Femsa rose.
Yesterday, a brokerage raised its target on Coca-Cola Femsa shares while maintaining a “hold” recommendation on the shares based on “stronger-than-expected 2004 results and a stronger outlook for 2005.”
Also, the brokerage reiterated a “buy” rating on Femsa shares, noting that its price target “might prove conservative on the back of record results at Oxxo along with an improved domestic pricing outlook at Cerveza.”
Also, ICA issues jumped, after an influential analyst raised revenue and earnings targets on the construction company, remarking, “we like the company’s improving performance, exposure to growing infrastructure spending in Mexico and limited large-scale domestic competition.”
The analyst upped its 2005 and 2006 earnings outlooks for ICA by a penny each to $0.12 per American Depositary Receipt and $0.15 per ADR, respectively.
On the deal front, Cemex announced that it completed its acquisition of the U.K.’s RMC Group, making the Mexican firm the world’s top supplier of ready mix concrete.
Meanwhile, Argentina’s market rebounded solidly, reclaiming most of the ground lost in the prior session, after President Nestor Kirchner declared the country out of its 3-year-old debt.
President Kirchner began the 2005 ordinary sessions of Congress today with a speech asserting that Argentina “has put the default behind it.”
Analysts noted that the market’s sentiment was somewhat brightened by Kirchner’s remarks, as the President was establishing a celebratory mood ahead of the release of bondholder participation figures.
The economy ministry said it will have preliminary estimates of acceptance rate results for the country’s US$ 103 billion debt swap exchange period ready on Thursday.
Thomson Financial Corporate Group