October 8, 2018 / 2:59 PM / 14 days ago

EMERGING MARKETS-Brazil's real, stocks rally on Bolsonaro win

    By Susan Mathew
    Oct 8 (Reuters) - Brazil's real hit a two-month high on
Monday and stocks jumped after market-preferred presidential
candidate Jair Bolsonaro's strong first-round win boosted
investor confidence that, if elected, he can get Congress to
pass a cut in state pensions in order to balace the budget.
    Far-right Congressman Bolsonaro clinched 46 percent of the
votes in the first-round of voting on Sunday, securing a
bigger-than-expected 17 percentage points more than his main
rival, leftist Fernando Haddad, and confounding poll predictions
of a tight fight ahead of the run-off later this month.

    Bolsonaro's strong victory has boosted confidence of a
run-off victory, sending the real higher by 3 percent and
the Bovespa stock index as much as 6 percent, on pace
for its biggest daily gain since March 2016.
    "He's got a credible plan for how to deal with two of
Brazil's most urgent economic problems: the cost of its pension
system and its stock of debt," said Edwin Gutierrez, Head of
Emerging Market Sovereign Debt at Aberdeen Standard
Investments.
    But some analysts warn the rally may be limited because the
market already rose sharply ahead of Sunday's vote. Also,
Commerzbank has said it is not yet clear how much influence
Paulo Guedes, Bolsonaro's economist who is expected to be named
minister of finance, will actually have on economic policies.
    The gains in the stock index were driven by state-owned
firms. Electricity utility Cemig was the best
performer, up 20 percent, while oil firm Petrobras'
more than 10 percent rise was the biggest boost.   
    Elsewhere, Argentina's peso rose more than 1 percent,
adding to last week's gains of close to 10 percent after the
recession-hit economy's government implemented a new economic
policy pursuant to a funding deal with the International
Monetary Fund.
    Mexico's peso weakened 0.4 percent, in line with
other emerging market currencies, as the dollar inched closer to
14-month highs.
    A fall in the euro on renewed concerns over Italy's budget
plans, and a weakness in global markets led by Chinese stocks on
rising Sino-U.S. trade tensions racked up demand for the
greenback.
    Key Latin American stock indexes and currencies at 1438 GMT:
 Stock indexes                            Daily  YTD % change
                                              %  
                              Latest     change  
 MSCI Emerging Markets          1000.76   -0.95        -13.61
                                                 
 MSCI LatAm                     2632.96   -0.19          -6.9
                                                 
 Brazil Bovespa                85972.27    4.43         12.53
                                                 
 Mexico IPC                    47926.20   -0.26         -2.89
                                                 
 Chile IPSA                     5331.10    1.35          1.35
                                                 
 Argentina MerVal              30783.90    2.04          2.39
                                                 
 Colombia IGBC                 12440.46     0.1          9.41
                                                 
                                                             
 Currencies                               daily  YTD % change
                                              %  
                                 Latest  change  
 Brazil real                     3.7550    2.69        -11.76
                                                 
 Mexico peso                    18.8990   -0.43          4.23
                                                 
 Chile peso                       681.7   -0.66         -9.84
                                                 
 Colombia peso                  3037.05   -0.24         -1.81
 Peru sol                         3.324    0.00         -2.62
                                                 
 Argentina peso (interbank)     37.3000    1.61        -50.13
                                                 
 Argentina peso (parallel)         37.5    1.33        -48.72
                                                 
 
 (Reporting by Susan Mathew in Bengaluru; Editing by David
Gregorio)
  
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