Despite Inflation Fears, Brazilian Market Ends in the Black

Latin American markets ended mostly in the red, although Brazil managed to turn around late in the session. Corporate news seemed to play a more major role in market movement.

Mexican issues posted steep declines, as investors continue to test the region’s political climate. Also, Argentine shares ebbed, as that region’s debt restructuring directs trading.

Brazil’s benchmark Bovespa Index edged up 15.10 points, or 0.06%, while Mexico’s benchmark Bolsa Index tumbled 106.22 points, or 0.85%. Argentina’s Merval Index negated 6.91 points, or 0.49%.

Brazilian issues staged a late-day turnaround, ultimately finishing higher. Earlier in the day, a weekly central bank survey of economists indicated higher inflation expectations, and some analysts forecast another boost of the benchmark interest rate, the Selic, in April.

Paper and pulp titan Aracruz Celulose S.A. announced that its first- quarter net profit leapt 35% to 201 million reals from 149 million reals a year ago, while revenues advanced to 791 million reals from 742 million reals.

Earnings before interest, taxes, depreciation and amortization climbed to 410 million reals from 381 million reals. The firm’s quarterly sales of pulp totaled 592,000 metric tons from 540,000 last year.

In a research note, a major investment bank cut its price target on Brasil Telecom, in part due to higher U.S. interest rates and higher country risk in Brazil.

Within the airline industry, Gol Linhas Aéreas Inteligentes SA reduced its planned public offering of preferred shares to 14.7 million from 20.4 million.

Mexican issues were decidedly lower. Although Mexican stocks have remained relatively stable since last week’s impeachment of Mexico City Mayor Andres Manuel Lopez Obrador, concerns regarding heightened political unrest remain.

In economic reports, industrial output rose 2.0% in February from a year ago, after advancing 3.1% in January. Economists were looking for a stronger showing for February.

Steelmaker Hylsamex remains active on parent company Alfa’s announcement last week that it is considering selling the unit.

Within the telecom group, Telefonos de Mexico SA said that it and “other entities” will sell 43.4 million shares in MCI Inc. to Verizon Communications. Verizon agreed to pay US$ 25.72 a share, plus an additional cash payment if MCI shares rise above US$ 35.52 within one year of the sale agreement date.

Argentine issues slipped lower on the session. Economy Minister Roberto Lavagna indicated Argentina will not hold further talks with bondholders that rejected the debt restructuring offer in the near-term, despite the International Monetary Fund’s request for further negotiations.

Still, Lavagna did say during an Inter-American Development Bank meeting over the weekend that holdouts “will be dealt with at the appropriate time.”

In corporate reports, aluminum producer Aluar set the record straight and said it has not suspended a 2.3 billion peso investment plan, as had been reported in the local press late last week. An unidentified Aluar official said there was a slight delay over agreements that should be resolved within a week.

Separately, the Chilean utility sector was in focus, after a major investment bank raised its price targets for Enersis and Endesa. The bank predicts a change to a Chilean electricity law will likely fetch higher prices for power generation firms.

Thomson Financial Corporate Group




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