EMERGING MARKETS-Brazil markets soar as Rousseff approval drops
(Updates prices, adds quotes, price move context) By Asher Levine SAO PAULO, March 27 (Reuters) - Brazil's currency and benchmark stock index skyrocketed on Thursday after a poll showed a decline in President Dilma Rousseff's approval rating, fueling investor optimism that the nation's economic policies could take a market-friendly turn. The country's Bovespa index closed with its biggest one-day gain in nearly seven months while the Brazilian real strengthened its most against the dollar since November. The broader MSCI Latin American stock index, in which Brazilian stocks carry a weighting of nearly 56 percent, notched its biggest one-day gain since July 2012. 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 current government for its heavy-handed 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 over 7 percent. Shares of state-controlled electric utility Centrais Eletricas Brasileiras SA, known as Eletrobras, soared over 10 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 idea behind the market's move is that economic policy could change in the short-term given the rising disapproval; that the government could see the signals and do something about it," said Gustavo Mendonca, economist with Saga Capital in Rio de Janeiro. "The rally will only last if we actually see a flow of good news to support that belief." The poll also boosted the real, which strengthened 1.72 percent on investor optimism that a new administration would better manage the nation's finances, which could attract more foreign interest in Brazilian assets, Mendonca added. 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. Elsewhere in Latin America, Chile's peso strengthened about 0.4 percent against the dollar, boosted by higher prices for copper, the country's main export. Colombia's peso also gained about 0.4 percent. A sudden surge of foreign cash into Colombia in the last week bolsters the central bank's case for extending dollar purchases as it seeks to build up reserves and takes advantage of a weaker dollar to do so, policymaker Ana Fernanda Maiguashca told Reuters late on Wednesday. The Mexican peso also strengthened about 0.4 percent, while the country's benchmark IPC stock index advanced 0.38 percent. "Slowing growth, lower commodity prices and a gradual normalization 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 2011 GMT: Stock indexes Latest daily % YTD % change change MSCI Emerging Markets 975.86 0.79 -3.44 MSCI LatAm 3142.48 3.41 -5.06 Brazil Bovespa 49628.45 3.47 -3.65 Mexico IPC 39911.01 0.38 -6.59 Chile IPSA 3745.01 1.29 1.24 Chile IGPA 18452.99 0.92 1.24 Argentina MerVal 6191.84 0.92 14.85 Colombia IGBC 13592.2 1.17 3.99 Peru IGRA 14037.48 0.03 -10.89 Venezuela IBC 2573.57 2.89 -5.96 Currencies Latest daily % YTD % change change Brazil real 2.2645 0.09 4.08 Mexico peso 13.0802 0.38 -0.38 Chile peso 551.7 0.38 -4.64 Colombia peso 1964.38 0.44 -1.65 Peru sol 2.808 0.11 -0.53 Argentina peso (interbank) 8.0000 0.03 -18.84 Argentina peso (parallel) 10.82 0.65 -7.58 (Additional reporting by Priscila Jordao and Bruno Federowski; Editing by Meredith Mazzilli)
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