EMERGING MARKETS-Latam stocks and currencies slump on global growth concerns

jueves 7 de abril de 2016 12:12 GYT

By Bruno Federowski
    SAO PAULO, April 7 (Reuters) - Latin American stocks and
currencies slumped on Thursday as worries over global economic
weakness drove investors away from risky assets.
    Major central banks including the U.S. Federal Reserve and
the European Central Bank flagged signs of tepid growth abroad
this week. Their willingness to take policy action has done
little to offset the concerns.  
    This has led many traders to unwind trades seeking to
benefit from wide interest rate spreads. The Japanese yen
, a common source of funding for transactions known as
carry trades, hit a 17-month high against the U.S. dollar on
    Local political issues were also a key driver as the
Peruvian sol weakened for a fifth consecutive session
ahead of general elections on Sunday. 
    The rise of leftist candidate Veronika Mendoza in opinion
polls and promises of "radical change" displeased many traders,
driving the sol to underperfom. 
    She is polling head-to-head against investor-favorite Pedro
Pablo Kuczynski for second place behind Keiko Fujimori. Fujimori
is not expected to secure a more than 50 percent majority, which
would prolong the presidential race until a second-round vote. 
    Strategists with Bank of America Merrill Lynch recommend
clients sell the Peruvian sol, aiming at a rate of 3.55 per U.S.
dollar. The currency is currently trading near 3.40 to dollar.
    "Given the wide differences in economic policy proposals by
Kuczynsky and Mendoza, coupled with poll results showing that
the second round election would likely be competitive,
uncertainty about the direction of economic policy in the next
administration will likely increase," they wrote.
    Brazil's benchmark Bovespa index bucked the bearish trend,
supported by financial shares.
    Local media on Thursday reported that executives testified
that President Dilma Rousseff's 2014 re-election campaign was
partly funded by kickbacks from large infrastruction progress.
    The allegations could bolster the case for fresh elections,
a move that many traders believe could help restore investor
trust in the economy.
    Key Latin American stock indexes and currencies at 1600 GMT:
 Stock indexes                               daily %     YTD %
                                              change    change
 MSCI Emerging Markets               808.43    -0.07      1.87
 MSCI LatAm                         2033.10    -0.63     11.81
 Brazil Bovespa                    48584.19     1.01     12.07
 Mexico IPC                        44894.61    -0.86      4.46
 Chile IPSA                         3867.84     -0.4      5.10
 Chile IGPA                        19002.74    -0.35      4.69
 Argentina MerVal                  11916.29    -2.81      2.07
 Colombia IGBC                      9703.30    -0.76     13.52
 Venezuela IBC                     15134.93     0.55      3.75
 Currencies                                  daily %     YTD %
                                              change    change
 Brazil real                         3.6985    -1.47      6.72
 Mexico peso                        17.8900    -1.40     -3.69
 Chile peso                           680.8    -0.97      4.25
 Colombia peso                         3108    -0.87      1.97
 Peru sol                            3.3971    -0.33      0.50
 Argentina peso (interbank)         14.5000     0.83    -10.47
 Argentina peso (parallel)            14.89     0.60     -4.16

 (Reporting by Bruno Federowski; Additional reporting by Paula
Arend Laier; Editing by Dan Grebler)