Monday, October 18

Brazil’s real outperforms Latam peers


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Central bank intervention saw Brazil’s

real outperform most Latin American currencies on Monday, while

a near 4% jump for oil major Ecopetrol put the Colombian equity

benchmark on course for its best session in nearly six weeks.

Most regional currencies weakened as the dollar perked up on

rising Treasury yields and after upbeat US durable goods data.

Brazil’s real ticked 0.1% higher. The central bank

late on Friday said it would hold additional twice weekly

auctions of traditional currency swaps, starting Sept. 27, to

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address demand from banks dismantling their “over-hedge”

position to protect against exchange rate fluctuations.

But, the currency is down almost 3% so far this year, as

political uncertainty outweighed headwinds from an aggressively

hawkish central bank. Worries about policy moves by President

Jair Bolsonaro leading up to elections next year have increased

as his popularity plummets.

“When we look at the broader institutions in Brazil, the

room for Bolsonaro to make significant trouble is limited but it

will be very noisy over the next few months. That will probably

turn some investors away, but create valuation opportunities,”

said Derrick Irwin, portfolio manager at Wells Fargo’s Berkeley

Street Emerging Markets Equity team.

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Stocks in Sao Paulo rose 0.5% with oil stocks in the

lead as crude prices rose amid supply concerns. Oil giant

Petrobras rallied around 2%. The Bovespa

index is down about 4.6% this year compared with a 2% slide in

the broader EM shares index

“Threading the needle in Brazil is going to be challenging

but there are some really good companies,” Irwin said, adding

that in Latam, they are overweight on Mexican equities.

Mexico’s IPC index, up 0.8% on Monday, has gained

about 17% in 2021.

Cement maker Cemex rose 2.6% after rating

agency S&P revised its outlook to positive from negative.

Colombia’s COLCAP index jumped 1.4% to a two-week

high as Ecopetrol looked to log its biggest gain in

five weeks.

Ecopetrol’s crude oil exports to Asia is seen rising, the

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company’s chief executive said on Monday. Some 63% of the oil

firm’s crude exports have been shipped to Asia in 2021, compared

with 52% last year.

The moves in Latam equities were in line with most other EM

shares on Monday which climbed as hopes rose that Beijing would

step in to limit the fallout from debt-laden Chinese developer

Evergrande.

Key Latin American stock indexes and currencies at 1433 GMT:

Stock indexes Latest Daily%

change

MSCI Emerging Markets 1265.63 0.04

MSCI LatAm 2306.94 0.45

Brazil Bovespa 113637.57 0.31

Mexico IPC 51487.38 0.75

Chile IPSA 4385.50 0.18

Argentina MerVal 75000.86 1.106

Colombia COLCAP 1327.65 1.4

Currencies Latest Daily%

change

Brazil real 5.3409 0.05

Mexico peso 20.1080 -0.34

Chile peso 795.7 -0.35

Colombia peso 3839.83 -0.20

Peru sol 4.1031 -0.13

Argentina peso 98.6700 -0.08

(interbank)

(Reporting by Susan Mathew in Bengaluru;

Editing by Alistair Bell)

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In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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