Latam stocks set for worst week in 9 months on global banking shocks

Article content

Latin American stocks and

currencies fell on Friday at the end of a tumultuous week when

Article content

more large lenders exacerbated fears of a global banking crisis,

prompting investors to flee riskier assets.

The MSCI’s index for Latin American equities

declined 0.9%, falling for six of the last seven trading

sessions and set to clock its worst weekly performance in nine

months.

Brazil’s Bovespa stock index, which houses some of

central and south America’s biggest lenders, shed 1%.

Unibanco Holding SA, Banco do Brasil SA

Article content

, Bradesco SA and BTG Pactual SA

fell over 2%.

Sentiment remained fragile after a roller-coaster week

sparked by the failure of Silicon Valley Bank in the U.S. and

concerns over the future of Swiss lender Credit Suisse

despite a $54 billion lifeline from Switzerland’s central bank.

“Latam markets are going to be volatile as long as concerns

in the U.S. and Europe are not mitigated, but again it’s just

going to be a reflection of what is happening externally,” said

Alfredo Coutinho, director of Moody’s Analytics for Latin

America.

On the brighter side, analysts, including Coutinho, have

noted that better fundamentals mean Latam financial institutions

should be relatively resilient compared to their global peers.

Article content

Article content

Stocks in Mexico, Latin America’s second-largest

economy, fell 0.8%. Mexico is also closely integrated with the

U.S. economy, relying on a steady stream of remittances and

trade.

Most major Latin American currencies also slid against a

weakening dollar, even though markets now expect the

Federal Reserve to raise interest rates by only 25 basis points

next week.

Prior to the banking crisis fears, there was widespread

speculation the U.S. central bank could deliver a 50-basis-point

hike.

Chile’s peso slipped 0.5% as investors assessed two

tough weeks for the country that included a magnitude 5.6

earthquake and the rejection of a proposed tax reform meant to

finance key elements of President Gabriel Boric’s leftist

Article content

agenda.

“Rejection may lead to moderation in reforms, spending and

tax burden. But this also reflects governability issues amid a

highly fragmented Congress,” Sebastian Rondeau, Latam economy

and fixed income strategy director at Bank of America.

Brazil’s real dropped 0.7%, Mexico’s peso

fell 1% and Peru’s sol slipped 0.4%.

A Reuters poll showed Brazil’s central bank will dig in its

heels on its hawkish stance next week by leaving the country’s

benchmark interest rate at a six-year high while likely

dismissing hopes for any imminent policy easing.

Data showed Brazil’s jobless rate rose to 8.4%

in the three months through January, slightly above market

expectations.

Further, the country’s Finance Ministry reduced its

Article content

estimates for economic growth this year, mentioning the impact

of higher basic interest rates on activity and credit, and

reduced liquidity in the U.S.

On the other hand, Colombia’s economic activity grew 5.85%

on year in January, surprisingly on the upside amid signs of a

slowdown in the South American country,

Among other emerging markets, Russia’s central bank held its

key interest rate at 7.5%, maintaining its hawkish rhetoric. The

rouble was up 0.9%.

Key Latin American stock indexes and currencies at 1920 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 951.50 1.08

MSCI LatAm 2082.01 -0.93

Brazil Bovespa 102356.56 -1.04

Mexico IPC 52095.48 -0.78

Chile IPSA 5112.03 -1.64

Argentina MerVal 220949.40 -1.092

Colombia COLCAP 1113.80 -0.41

Currencies Latest Daily %

change

Brazil real 5.2763 -0.73

Mexico peso 18.8917 -1.00

Chile peso 826.8 -0.53

Colombia peso 4840.09 -0.32

Peru sol 3.7881 -0.35

Argentina peso (interbank) 203.3300 -0.19

Argentina peso (parallel) 379 1.06

(Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru;

Editing by Paul Simao and Josie Kao)