EMERGING MARKETS-Latam markets extend rally but Bovespa halts gains
By Walter Brandimarte and Priscila Jordão RIO DE JANEIRO/SAO PAULO, April 8 (Reuters) - Latin American markets extended their rally on Tuesday as investors hunted for yield globally, although Brazilian stocks halted gains after jumping 16 percent over the past three weeks. The Brazilian real strengthened past 2.2 per dollar for the first time since late October as investors sought to take advantage of the country's rising interest rates while betting that an upcoming government may adopt more market-friendly policies. Hopes that Brazil's next leader will curb government spending to fight inflation and reduce government intervention in the economy have been encouraging investors since polls started showing President Dilma Rousseff losing popularity among voters. Although Rousseff remains on track to win re-election on Oct. 5, investors believe she could be forced to change her policies in a second term as Brazilians grow increasingly worried about inflation. Investors are "taking the view that a drop in her popularity would increase the chances for a more market-friendly upcoming government," Barclays' strategists Bruno Rovai and Koon Chow wrote in a research note. Barclays recommended that clients maintain their exposure to the Brazilian currency until it gains to 2.1740 per dollar. "There is still a favorable carry-trade environment in the global markets which, together with positive idiosyncratic factors, argues for investors to stay long the real," the bank said, referring to a strategy in which investors borrow in a low-yielding currency to fund investments in higher-yielding ones. Brazil has become a magnet for foreign investors since emerging market turbulence abated in the past few weeks as investors sought to take advantage of cheap valuations in its stock market. The benchmark Bovespa index slid 0.8 percent, however, after posting gains during 12 of the past 16 sessions. The decline was driven by a slump of more than 3 percent in shares of Petroleo Brasileiro SA, or Petrobras, which had soared nearly 40 percent since March 17. "This is a correction from yesterday's gains, when the Brazilian market decoupled from international bourses with gains excessively focused on a few shares such as those of Petrobras, Eletrobras and banks," said Hersz Ferman, an economist with Elite brokerage in Sao Paulo. Despite the decline in Brazilian shares, the broader MSCI index for Latin American stocks rose 0.7 percent, adding to gains of about 15 percent since mid-March. Key Latin American stock indexes and currencies at 1735 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging 1011.66 0.75 0.15 Markets MSCI LatAm 3296.2 0.61 2.36 Brazil Bovespa 51742.78 -0.79 0.46 Mexico IPC 40890.62 0.73 -4.30 Chile IPSA 3817.63 1.04 3.20 Chile IGPA 18736.67 0.87 2.80 Argentina MerVal 6487.53 0.67 20.34 Colombia IGBC 13844.54 -0.21 5.92 Peru IGRA 14436.98 0.94 -8.36 Venezuela IBC 2523.22 0.07 -7.80 Currencies daily % YTD % change change Latest Brazil real 2.2041 0.67 6.93 Mexico peso 12.992 0.14 0.29 Chile peso 545.2 1.25 -3.50 Colombia peso 1930.04 0.17 0.10 Peru sol 2.808 0.00 -0.53 Argentina peso 8.0000 0.03 -18.84 (interbank) Argentina peso 10.31 2.33 -3.01 (parallel) (Reporting by Walter Brandimarte and Priscila Jordao; Editing by Tom Brown)
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