April 11, 2016 / 4:26 PM / 2 years ago

EMERGING MARKETS-Political hopes lift Peru, Brazil currencies to highest in months

By Bruno Federowski
    SAO PAULO, April 11 (Reuters) - The Peruvian and Brazilian
currencies shot to their highest in months on Monday as traders
hoped that political uncertainty in both countries could soon
give way to a market-friendly policy agenda.
    The Peruvian sol  jumped more than 2 percent
to a six-month high as leftist presidential candidate Veronika
Mendoza seemed set to miss out on a second-round vote. The
country's select stock index headed for its biggest
daily gain since 2008.
    Peru's stocks and currency had suffered in the run-up to the
election as traders feared that Mendoza's rise in opinion polls
could spell the demise of the free-market model pursued by
Peruvian governments for a quarter century.
    Instead, conservative Keiko Fujimori will likely face off
with investor darling Pedro Pablo Kuczynski, which should yield
little surprising in terms of economic policy. 
    "(The runoff) is widely regarded as the market's preferred
outcome, with both candidates pledging to maintain pro-business
policies, unlike Mendoza, whose populist rhetoric and recent
surge in the polls had generated market anxiety," J.P. Morgan
economist Franco Uccelli wrote in a client note.
    Meanwhile, the Brazilian real extended its rally for
a second day to an eight-month peak before a congressional
committee was set to vote on President Dilma Rousseff's
impeachment after market close. 
    A majority decision for the leftist President's ouster would
pave the way for a vote on the House floor as soon as this week.
    Local media polls have generally shown increasing lawmaker
support for an impeachment, boosting the country's stocks and
currency. Many traders believe a change in government would lay
the groundwork for an investment recovery in the recession-mired
    "This week carries a promise of high stakes," said
Correparti brokerage trader Ricardo Gomes da Silva.
    Shares of BM&FBovespa SA rose about 0.5 percent
after it agreed to buy rival Cetip SA Mercados Organizados
, creating Latin America's largest bourse with a
market value of almost 12 billion reais ($3.4 billion).
    Deutsche Bank Securities analyst Tito Labarta lowered
recommendation on BM&FBovespa shares to "hold", saying the
acquisition makes "makes strategic sense, but outperformance
limits upside." 
    Key Latin American stock indexes and currencies at 1605 GMT:
 Stock indexes                                 daily %   YTD %
                                     Latest     change  change
 MSCI Emerging Markets                825.49      1.06    2.86
 MSCI LatAm                          2151.05      2.45   14.74
 Brazil Bovespa                     50629.95      0.67   16.79
 Mexico IPC                         44996.68      0.31    4.70
 Chile IPSA                          3919.78     -0.18    6.51
 Chile IGPA                         19226.41     -0.15    5.92
 Argentina MerVal                   12360.17      1.13    5.87
 Colombia IGBC                       9864.26      0.63   15.41
 Venezuela IBC                      15189.02     -0.08    4.12
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                          3.5170      2.22   12.23
 Mexico peso                         17.6435      0.77   -2.34
 Chile peso                            680.5      0.34    4.29
 Colombia peso                          3060      1.12    3.57
 Peru sol                             3.2916      2.32    3.72
 Argentina peso (interbank)          14.5100     -0.14  -10.53
 Argentina peso (parallel)             14.87      0.27   -4.03

 (Reporting by Bruno Federowski; Additional reporting by Paula
Arend Laier; Editing by Daniel Flynn and Meredith Mazzilli)
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