August 29, 2019 / 3:05 PM / 17 days ago

EMERGING MARKETS-Latam stocks gain on trade hopes; Argentina hit by new debt plan

    By Sruthi Shankar
    Aug 29 (Reuters) - Latin American stocks gained ground on
Thursday after China said it hoped for a de-escalation of trade
tensions with the United States, although a firmer dollar
pressured most regional currencies. 
    The Brazilian real edged up 0.15%, struggling to
recover from its lowest level this year despite data showing
Brazil's economy rebounded strongly in the second quarter after
having shrunk in the first, meaning Latin America's largest
economy comfortably avoided falling back into recession.

    The currencies of Colombia and Mexico were
largely flat as the dollar firmed against a basket of major
currencies after data showed the strongest growth in U.S.
consumer spending in 4-1/2 years even as economic growth slowed
in the second quarter.
    However, all the spotlight was on Argentina's markets after
the government announced plans to "reprofile" about $100 billion
of its debt on Wednesday.
    In response, Argentina's peso fell 2.6% to 59.65
per dollar and bond prices headed to a record low, while its
country risk soared to levels not seen since 2005. 
    "Despite the market reaction, I do believe taking steps to
preserve foreign exchange is a positive. There are lots of
questions around the voluntary reprofiling nature of the dollar
debt," said Jim Barrineau, head of emerging markets debt at
Schroders.
    "I don't expect those questions to get resolved until the
(Argentina) election. But right now, the key aspect of this is
stabilizing the currency, preventing significant reserve
drawdown. If they can do that, investors over time at current
prices will be buyers rather than sellers."
    The peso has shed about 24% of its value since
business-friendly President Mauricio Macri's suffered an
unexpectedly large defeat in an Aug. 11 primary election at the
hands of populist-leaning Peronist candidate Alberto Fernandez.
Argentina's general election will be held on Oct. 27.
    The Merval also dropped about 4%, bucking the upward
trend in Latin American stocks after China's commerce ministry
said Beijing and Washington are discussing the next round of
talks scheduled in September and hoped U.S. officials could
cancel the planned additional tariffs to avoid an escalation.

    The Bovespa jumped 1% to post its third straight day
of gains, recovering from its lowest level in nearly three
months, helped by shares in miner Vale and oil
company Petrobras.

    Latin American stock indexes and currencies at 1422 GMT:
    
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       969.81     0.46
                                     
 MSCI LatAm                 2526.14     0.69
                                     
 Brazil Bovespa            98977.00      0.8
                                     
 Mexico IPC                41390.97      1.1
                                     
 Chile IPSA                 4659.47     1.08
                                     
 Argentina MerVal          24505.51   -3.895
                                     
 Colombia IGBC             12468.81     0.22
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 4.1621     0.15
                                     
 Mexico peso                20.0709     0.13
                                     
 Chile peso                  719.95     0.43
                                     
 Colombia peso              3471.43     0.05
                                     
 Peru sol                    3.3898     0.33
                                     
 Argentina peso             59.6500     -2.6
 (interbank)                         
                                     
 
    

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Paul Simao)
  
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