June 7, 2019 / 8:26 PM / 2 months ago

EMERGING MARKETS-Latam FX firm, Mexican peso recovers after Pemex junk-ed by Fitch

 (Recasts throughout, updates prices, adds quote, graphic)
    By Aaron Saldanha
    June 7 (Reuters) - Latin American currencies broadly firmed
against the dollar on Friday, with the peso aided by U.S.
President Donald Trump's comment that chances were good for an
immigration deal with Mexico, a day after Fitch's downgrade of
Pemex whacked the currency.
    The downgrade of the state-owned oil firm's debt to "junk"
prompted a further sell-off in the debt-laden company's bonds.
Fitch downgraded Mexico's sovereign debt on Wednesday.

    Trump's optimistic tweet raised the appetite for risk,
although the White House was still pushing ahead with its plan
to impose import tariffs on its southern neighbor next
week.
    Mexico's peso firmed 0.6%, while MSCI's index of
Latin American currencies gained 0.4%.     
    Yields on local 10-year bonds slid a little more
than 8 basis points from Thursday's highs, which were recorded
in the wake of the Pemex downgrade. Stocks on the Mexican
benchmark eked out a 0.1% rise.     
    Despite one-month peso implied volatility rising to near its
highest level of 2019 and some investors fearing Moody's could
also downgrade Pemex, others see value in company's debt
relative to the Mexican sovereign.
    "In hard currency, the (yield) spread to sovereign is
attractive in our view, especially in the long end of the curve
i.e. above 15 years. We believe the default scenario is remote,"
said Marcelo Assalin, head of emerging market debt at NN
Investment Partners. 
    Assalin said Pemex's credit worthiness for peso-denominated
debt "is actually higher than in dollars, particularly given the
weak peso," noting the about 340 basis-point spread of Pemex's
peso debt to the Mexican sovereign's.
    Brazil's real firmed 0.2% against a weak dollar,
while stocks rose 0.6%, aided by gains among consumer
discretionary and energy stocks.
    Petroleo Brasileiro SA (Petrobras) common shares
and preferred shares gained 2.2% and 1.6%,
respectively, helped by a 2.8% rise in Brent crude futures
.
    The state-controlled oil firm's chief executive said
Thursday's ruling by Brazil's Supreme Court that state-run firms
do not need congressional approval to sell their units was "very
important and a victory for the country".
    Colombia's peso strengthened 0.7%, while stocks
 rose 1.4%. Energy firm Ecopetrol SA traded 3.6%
higher.
    The state-run company said it will launch a new phase of
cost cuts aimed at saving 8 trillion Colombian pesos ($2.45
billion), with the bulk of the savings in exploration and
production.

    Latin American stock indexes and currencies at 1859 GMT
    
 Stock indexes                                 Daily
                                                   %
                                   Latest     change
 MSCI Emerging Markets              1,007.23    0.45
 MSCI LatAm                         2,738.35    0.95
 Brazil Bovespa                    97,753.14    0.56
 Mexico IPC                        43,210.31    0.14
 Chile IPSA                         4,966.59     0.8
                                              
 Argentina MerVal                  35,667.93   -0.18
 Colombia IGBC                     12,245.65     1.4
                                                    
 Currencies                                    Daily
                                                   %
                                      Latest  change
 Brazil real                          3.8688    0.34
 Mexico peso                         19.5798    0.53
                                              
 Chile peso                            691.8    0.06
 Colombia peso                      3,263.18    0.78
 Peru sol                              3.327    0.27
 Argentina peso (interbank)          44.8500    0.18
                                              
 
($1 = 3,263.1800 Colombian pesos)

    
 (Reporting by Aaron Saldanha in Bengaluru
Editing by Sonya Hepinstall)
  
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