EMERGING MARKETS-Brazil stocks drop further as election polls show tight race
By Asher Levine SAO PAULO, Oct 16 (Reuters) - Brazilian stocks sank for the second straight session on Thursday after two voter polls showed President Dilma Rousseff has more support than many investors had imagined ahead of the Oct. 26 election. Brazil's Bovespa stock index dropped about 2 percent, adding to Wednesday's 3.24 percent decline. Polls by research firms Datafolha and Ibope released after market close on Wednesday showed a statistical dead heat between Rousseff and market-friendly challenger Aecio Neves. Many investors believe a new administration would enact policies that are more favorable to minority shareholders in state-run companies and help lower the risk premium on local assets. They had grown optimistic over Neves' chances in recent days after he secured an important endorsement and performed well in an early poll. Shares of widely-traded firms such as state-run oil producer Petroleo Brasileiro SA and lender Itau Unibanco Holding SA, which tend to attract a higher share of foreign investors, fell sharply. "The fight is still head-to-head, but a warning light is on in the (Neves) camp," wrote Marco Aurelio Barbosa, an economist with CM Capital Markets in Sao Paulo. Brazil's currency, the real, weakened for the third straight day though found technical support at the 2.50 per dollar level. Traders attributed part of the currency's losses to comments made by Neves' top financial adviser Arminio Fraga late on Wednesday. In a Reuters interview, Fraga said a Neves government would end the central bank currency intervention program that is currently backstopping losses in the real. "Most investors agree that the real will (weaken) eventually with either election outcome," wrote Citi strategist Dirk Willer in a client note. "The question is if it first strengthens with an Aecio Neves win before selling off. With yesterday's comments investors now think that an initial strengthening is less likely and a (weaker real) is a one-way bet." Elsewhere in Latin America financial markets were broadly weaker, tracking a global spike in risk aversion over concerns about global economic growth. The MSCI Latin American stock index touched its lowest level in two weeks, while every major currency in the region slipped against the dollar. Chile's peso weakened its most in nearly a month on lower copper prices and ahead of a central bank rate-setting meeting later in the day. Meanwhile, the Mexican peso extended Wednesday's loss, falling to its weakest level since July 2012 as traders continued to worry about weak global economic growth weighing on the United States, the country's top trading partner. A Reuters poll released on Thursday showed Latin American economies likely face years of weak growth and market volatility as they struggle with lower commodity prices, slowing credit and less abundant capital inflows. Key Latin American stock indexes and currencies at 1427 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 970.5 -1.23 -2 MSCI LatAm 3099.6 -2.36 -0.82 Brazil Bovespa 55094.02 -1.85 6.96 Mexico IPC 42639.05 -0.8 -0.21 Chile IPSA 3783.08 -0.22 2.27 Chile IGPA 18612.71 -0.23 2.12 Argentina MerVal 9554.609 -1.02 77.23 Colombia IGBC 12745.61 -0.59 -2.49 Peru IGRA 15796.3 -0.14 0.27 Venezuela IBC 2890.93 0 5.64 Currencies daily % YTD % change change Latest Brazil real 2.4741 -0.69 -4.74 Mexico peso 13.5957 -0.49 -4.16 Chile peso 592.3 -0.81 -11.18 Colombia peso 2076.49 -0.40 -6.96 Peru sol 2.909 -0.07 -3.99 Argentina peso 8.4750 0.03 -23.39 (interbank) Argentina peso 14.68 0.61 -31.88 (parallel) (Additional reporting by Paula Laier; editing by Andrew Hay)
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