October 16, 2019 / 3:23 PM / 3 months ago

EMERGING MARKETS-Brazil's real recovers, but most Latam currencies weaken

    By Susan Mathew
    Oct 16 (Reuters) - Latin American stocks and currencies were
mixed on Wednesday amid fresh strains in the China-U.S.
relationship, with Brazil's real recovering slightly from
two-week lows hit last session. 
    China said it resolutely opposed new measures related to
pro-democracy protests in Hong Kong passed by the U.S. House of
Representatives and urged lawmakers to stop interfering.

    "We believe that the market should focus less on this (China
reaction to the legislation) and monitor the willingness from
both sides to reach a trade deal," Morgan Stanley analysts wrote
in a note. 
    Brazil's real rose 0.2% and the Mexican peso
gained 0.1%, while most other regional currencies fell against a
steady dollar. Technicals show that Mexico's peso is on the cusp
of a much bigger rally.
    Wall Street fell and stock markets in Brazil and
Chile followed. Those in Colombia and Mexico
    In Brazil, a corruption probe was launched by the police on
Tuesday into the head of President Jair Bolsonaro's right-wing
Social Liberal Party (PSL) Luciano Bivar. 
    The widening investigations threatens to slow progress on
the economic agenda. A second round of voting by the Senate on a
crucial tax reform is expected next week.
    In Mexico, the Senate on Tuesday approved a controversial
constitutional change that would give the public a chance to
vote again to either retain or remove a president halfway
through a six-year term.
    Critics say the vote would let leftist Andres Manuel Lopez
Obrador put himself at the centre of the campaign for mid-term
elections for the lower chamber of Congress, due to be held
around 2021.
    The peso had whipsawed when Lopez Obrador won elections here
 in July last year. 
    The Colombian peso slipped 0.2%. Morgan Stanley
analysts are watching for a ruling this week by Colombia's
constitutional court on the legality of a financing law that was
approved late year.
    "While our base case does not incorporate a dissolution of
the law, such a measure would be a net negative for local
assets, in our view," they said.
    "Although removing the law would likely lead to a small
increase in revenues next year... the negative growth and
investor confidence implications would likely be a bigger
driver," they said, adding that the ensuing uncertainty could
lead to rating downgrades.
    Key Latin American stock indexes and currencies at 1502 GMT:
   Stock indexes            Latest    Daily %
 MSCI Emerging Markets       1022.96     0.36
 MSCI LatAm                  2685.00    -0.59
 Brazil Bovespa            104035.17    -0.43
 Mexico IPC                 43511.62     0.62
 Chile IPSA                  5133.73    -0.46
 Argentina MerVal           30969.69   -1.162
 Colombia IGBC              12867.08     0.07
       Currencies           Latest    Daily %
 Brazil real                  4.1720     0.18
 Mexico peso                 19.2140     0.11
 Chile peso                   718.58    -0.51
 Colombia peso               3457.55    -0.22
 Peru sol                     3.3698    -0.11
 Argentina peso              58.3400    -0.10
 (Reporting by Susan Mathew in Bengaluru; Editing by Nick
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