October 31, 2018 / 9:33 PM / 20 days ago

EMERGING MARKETS-LatAm ends October higher; Mexican peso hit by Fitch warning

    By Susan Mathew
    Oct 31 (Reuters) - Most Latin American currencies lost ground against a
strong dollar on Wednesday while stocks tracked a strong session on Wall Street,
but both asset classes racked up a second straight month of gains in October as
domestic drivers helped them outperform emerging markets elsewhere.
    The MSCI index of Latin American stocks rose 3.4 percent in
October, while the currency index gained 1.6 percent, in
contrast to declines for the month for broader emerging market stock
and currency.
    Optimism over presidential elections in Brazil, an International Monetary
Fund funding facility for recession-hit Argentina, and a new trade deal between
Mexico, the United States and Canada shielded regional markets from concerns
about global growth and trade that punished other emerging markets.  
    However, Mexican markets were most impacted among regional markets by global
issues and fell in October. The peso was down around 8 percent for the
month, and stocks clocked a monthly loss of 11 percent, with worries
earlier in October on the North American Free Trade Agreement adding to the
losses.
    Even so, the currency was among the best performing currencies in the world
this month.  
    On Wednesday, the peso was steady after earlier weakening against the
dollar following a warning by credit agency Fitch that it could downgrade the
country's debt rating. Fitch also revised Mexico's rating outlook to negative,
citing concerns about the incoming government's policies.
    Leftist President-elect Andres Manuel Lopez Obrador, who is to take office
on Dec. 1, earlier this week canceled a partially built Mexico City airport in
which billions of dollars have already been invested - a decision that sent the
peso down more than 3.5 percent and stocks 4 percent lower.
    Analysts say the next bout of volatility for the policy may stem from the
new government's budget later this year.
    Mexican stocks closed 0.9 percent higher on the day with recently battered
shares of airport operators ASUR and GAP seeing some
buying.
    In Brazil, the real closed little changed on Wednesday after the
central bank held interest rates at an all-time low, as widely expected.
 For the month, the currency strengthened by about 8 percent,
boosted by the election of market-preferred presidential candidate Jair
Bolsonaro. Sao Paulo's Bovespa stock index gained almost 10 percent in
October.      
    The Argentine peso strengthened more than 2 percent on Wednesday,
buoyed by month-end flows.
    On the month it was the best performer, adding close to 15 percent as a
$56.3 billion funding facility from the IMF and short-term debt sale by the
central bank at sky-high rates plugged the currency's fall.
    
    Key Latin American stock indexes and currencies at 2104 GMT:
 Stock indexes                    Latest       Daily    YTD pct
                                                 pct     change
                                              change  
 MSCI Emerging Markets               955.92      2.1     -17.48
 MSCI LatAm                        2,664.27     0.53      -5.79
 Brazil Bovespa                   87,423.55     0.62      14.43
 Mexico IPC                       43,942.55     0.93     -10.97
 Chile IPSA                        5,104.33     1.76       1.76
 Argentina MerVal                 29,491.11     0.22      -1.91
 Colombia IGBC                    12,393.78    -0.83       9.00
                                                               
 Currencies                          Latest    Daily    YTD pct
                                                 pct     change
                                              change  
 Brazil real                         3.7222    -0.04     -10.99
 Mexico peso                        20.3295     0.00      -3.10
 Chile peso                           696.5    -0.43     -11.75
 Colombia peso                      3215.13     0.00      -7.25
 Peru sol                             3.371    -0.30      -3.98
 Argentina peso (interbank)         35.8500     2.48     -48.12
                                                      
 

 (Reporting by Susan Mathew in Bengaluru;
Editing by Leslie Adler)
  
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