EMERGING MARKETS-Brazil real underperforms after Moody's cuts country to junk

miércoles 24 de febrero de 2016 11:10 GYT

By Bruno Federowski
    SAO PAULO, Feb 24 (Reuters) - The Brazilian real
underperformed weaker Latin American currencies on Wednesday
after Moody's Investors Services became the latest ratings
agency to cut the country's debt rating to junk, downgrading it
by two notches.
    Market reaction was somewhat muted as many investors were
prepared for a third downgrade after Standard & Poor's and Fitch
Ratings stripped Brazil of its investment grade.
    Citing economic and political turmoil, Moody's downgraded
Brazil's rating to Ba2 and indicated it could soon cut it again.
    The move came a week after S&P sliced Brazil's rating for a
second time in less than six months, taking it further into junk
    "The market expected a cut but the magnitude caught me by
surprise," said Thiago Castellan Castro, a trader with
Renascença brokerage in São Paulo.
    Nevertheless, traders saw limited room for weakness,
pointing out that Brazilian credit default swaps (CDS) had been
trading at levels consistent with a lower rating even before the
    The Brazilian real fell more than 1 percent, compared
to a 0.6 percent drop in the Mexican peso  and
the Colombian peso. Both currencies followed oil prices
lower for a second day after comments by the Saudi oil minister
dashed hopes of an output cut. 
    Moody's downgrade pressured shares of Brazilian banks,
weighing on the Bovespa stock index. A decision to
reduce dividend payouts to investors to 25 percent of net income
this year also helped drag shares of Banco do Brasil SA
    Shares of state-controlled oil company Petroleo Brasileiro
SA, whose rating will likely also be lowered soon on
the back of the sovereign downgrade, fell almost 5 percent.
    Latin American stock indexes and currencies at 1430 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets               733.40     -1.53    -6.22
 MSCI LatAm                         1744.59     -2.42    -2.29
 Brazil Bovespa                    41407.64     -2.62    -4.48
 Mexico IPC                        42678.13     -1.25    -0.70
 Chile IPSA                         3701.10     -0.41     0.57
 Chile IGPA                        18175.21     -0.36     0.13
 Argentina MerVal                  12240.17     -2.33     4.84
 Colombia IGBC                      8933.46     -0.69     4.52
 Venezuela IBC                     16416.02      0.77    12.53
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                         4.0056     -1.13    -1.46
 Mexico peso                        18.3250     -0.65    -5.98
 Chile peso                           699.2     -0.51     1.50
 Colombia peso                      3343.95     -0.60    -5.22
 Peru sol                              3.54     -0.28    -3.56
 Argentina peso (interbank)         15.2500      0.66   -14.87
 Argentina peso (parallel)            15.45     -0.13    -7.64

 (Additional reporting by Paula Arend Laier; Editing by Meredith