January 24, 2019 / 9:45 PM / 3 months ago

EMERGING MARKETS-Latam shares rise; strong dollar pressures most currencies

 (Recasts throughout, updates prices)
    By Susan Mathew
    Jan 24 (Reuters) - Most Latin American stocks rose on
Thursday with Brazilian shares rising more than 1 percent and
hitting fresh highs on pension reform optimism, while most
regional currencies struggled against a strong dollar.
    The dollar rose sharply against the euro after European
Central Bank President Mario Draghi said near-term economic
growth in the euro zone was likely to be weaker than previously
expected due to the fallout from factors ranging from China's
slowdown to Brexit.
    Globally, sentiment remained bleak as the ECB warning was
coupled with increasing uncertainty over U.S. politics and the
U.S.-China trade tensions. Still, world stocks
clawed 0.2 percent higher.
    Brazilian stocks which have been hitting fresh
records highs almost every session this month, continued to do
so on Thursday, up 1.2 percent, bolstered by the expectation
that the new government would reform its bloated pension system.
    In an interview with Reuters, economy minister Paulo Guedes
said an overhaul of Brazil's pension system could save up to 1.3
trillion reais ($345 billion) over the next decade.
    "We continue to be optimistic on the prospect of a robust
pension reform, though the ambitious savings will most likely be
diluted as the reform makes its way through congress," Citigroup
analysts said.
    Stocks in Argentina, Chile and Colombia rose between 0.2
percent and 0.5 percent, while Mexican shares fell.
    Among currencies, the Brazilian real weakened for the
seventh time in eight sessions, down 0.2 percent.
    Antje Praefcke, an analyst at Commerzbank urges caution
regarding the real as downside risks are expected to dominate
till the much awaited pension reforms get passed.  
    The Mexican peso edged up. Data showed that inflation
for the first-half of January rose 0.11 percent, below the 0.27
percent expectation pointing to the central bank standing pat on
rates at the next meeting.
    "Bank of Mexico has sufficient arguments not to move its
funding rate in the following months unless inflation
accelerates in the second half of January," analysts at CI Banco
said in a note.
    The Argentine peso firmed. Argentina's central bank
has been buying millions of dollars in foreign exchange markets
over the past weeks to weaken its currency, as it slips outside
the limits of a non-intervention band agreed with the
International Monetary Fund.
    "Given that ARS has continued to trade slightly below the
floor of the no-intervention zone, we are watching out for any
potential policy reassessment to keep a tighter grip on the
currency and strengthen the reserve ratios," Morgan Stanley
analysts said. 
     "In the near term, we expect ARS to continue testing the
floor of the no-intervention band," they said
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    Meanwhile in Venezuela, government dollar bonds hit their
highest levels since 2017 on Thursday and state-run oil company
PDVSA's debt also rose after international support for
opposition leader Juan Guaido spurred hopes that socialist
President Nicolas Maduro might be forced from office.

    
    Key Latin American stock indexes and currencies at 2135 GMT:
 
       Stock indexes                 Latest     Daily
                                                 pct
                                                change
 MSCI Emerging Markets               1,019.44      0.78
 MSCI LatAm                          2,876.78      1.49
 Brazil Bovespa                     97,677.19      1.16
 Mexico IPC                         43,566.11     -0.26
 Chile IPSA                          5,414.85      0.22
 Argentina MerVal                   34,939.05      0.34
 Colombia IGBC                      11,717.67      0.48
                                                       
           Currencies                Latest     Daily
                                                 pct
                                                change
 Brazil real                           3.7717     -0.02
 Mexico peso                          19.0152      0.04
 Chile peso                             671.6     -0.01
 Colombia peso                        3,169.5     -0.58
 Peru sol                               3.347     -0.21
 Argentina peso (interbank)           37.3500      0.56
                                               
 

 (Reporting by Susan Mathew in Bengaluru;
Editing by Marguerita Choy)
  
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