EMERGING MARKETS-Brazil state-run firms soar as Rousseff approval drops
By Asher Levine SAO PAULO, March 27 (Reuters) - Shares of Brazil's state-controlled companies jumped on Thursday after a poll showed a decline in President Dilma Rousseff's approval rating, as investors bet the stocks' outlook would brighten if she fails to win re-election. The country's benchmark Bovespa index rallied to its highest level in over two months while the broader MSCI Latin American stock index advanced for the eighth session in nine. Brazil's currency, the real, strengthened sharply against the dollar. Other currencies in the region also gained. A widely-tracked poll released on Thursday showed a decline in popular support for the Rousseff administration ahead of October's presidential election, though she is still expected to win. Many investors have been critical of the Rousseff administration for heavy-handed government intervention in the private sector and policies that run against the interests of minority shareholders in state-controlled firms. The slightly higher probability that Rousseff could lose drove shares of both state-run lender Banco do Brasil SA and oil firm Petroleo Brasileiro SA, known as Petrobras, up nearly 6 percent. Shares of state-controlled electric utility Centrais Eletricas Brasileiras SA, known as Eletrobras, soared almost 11 percent. "Any change in any percentage point that points to the possibility of the (Rousseff) government not being re-elected helps these shares," said Thiago Montenegro, a trader at Quantitas Asset Management in Porto Alegre, Brazil. "The market is starting from the premise that the state firms couldn't possibly be treated any worse." Petrobras shares have lost nearly 40 percent since Rousseff took power in 2011, hurt by a government policy that forces the company to import fuel and sell it at a loss in order to tamp down inflation. Banco do Brasil suffered from a government push to lower lending spreads in an effort to boost consumption, while shares of Eletrobras plunged last year after the government forced it to accept lower tariff rates, also to boost growth and tame prices. The poll also boosted the real, which strengthened more than 1 percent on investor optimism that a new administration would better manage the nation's finances, traders said. Investors meanwhile eyed higher interest rates after the central bank on Thursday sharply raised its 2014 inflation forecast and said it sees the economy growing at a moderate pace. Investors also watched for a sovereign bond sale after the government said it had chosen banks to issue seven-year euro bonds in European and American markets, just days after ratings agency Standard & Poor's downgraded Brazil's sovereign debt rating. Chile's peso strengthened about 0.5 percent against the dollar, boosted by higher prices for copper, the country's main export. The Mexican peso also strengthened about 0.5 percent, while the country's benchmark IPC stock index advanced 0.15 percent. "Slowing growth, lower commodity prices and a gradual normalisation of interest rates in the developed world are likely to weigh on most of (Latin America's) markets," wrote Capital Economics economist Edward Glossop in an investor note Thursday. "But in contrast, we expect stronger economic growth, aided by the U.S. recovery, to support Mexico's financial markets." Key Latin American stock indexes and currencies at 1537 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 974.24 0.62 -3.44 MSCI LatAm 3119.18 2.64 -5.06 Brazil Bovespa 49172.09 2.52 -4.53 Mexico IPC 39813.46 0.13 -6.82 Chile IPSA 3706.84 0.26 0.21 Chile IGPA 18322.39 0.21 0.52 Argentina MerVal 6232.87 1.59 15.62 Colombia IGBC 13517.21 0.61 3.41 Peru IGRA 14043.09 0.07 -10.86 Venezuela IBC 2573.56 2.89 -5.96 Currencies daily % YTD % change change Latest Brazil real 2.2650 1.83 4.05 Mexico peso 13.0735 0.43 -0.33 Chile peso 551.3 0.45 -4.57 Colombia peso 1965.04 0.41 -1.68 Peru sol 2.81 0.04 -0.60 Argentina peso (interbank) 8.0000 0.03 -18.84 Argentina peso (parallel) 10.83 0.55 -7.66 (Additional reporting by Priscila Jordao and Bruno Federowski; Editing by Meredith Mazzilli)
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