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Fever Brazil Leads Stocks to New Record High

Latin American stocks continued their winning ways, with the Brazilian, Mexican and Argentine markets again closing at record highs. Investors remain enthusiastic regarding the positive outlook for Brazil’s economy and Argentina’s ongoing debt swap.

Brazil’s benchmark Bovespa Index climbed 254.73 points, or 0.96%, while Mexico’s benchmark Bolsa Index inched up 5.71 points, or 0.04%. Argentina’s Merval Index rose 9.52 points, or 0.64%.

Brazilian equities continued their solid gains to finish at a third straight record high, as foreign investors continued to drive the market upward.

Traders attributed the recent bull run to a surge of funds from overseas investors eager to cash in on the positive outlook for Brazil’s economy. That economy is forecast to grow by at least 3.5% in 2005, much of it stemming from consumer spending.

Brazil’s market could extend its advance into early next week, but could end quickly if inflation figures set for release on Monday are too strong, driving the central bank to execute a significant monetary tightening at its monthly rate-setting meeting next Tuesday and Wednesday.

In the news, a pair of releases indicated that Brazil’s inflation had begun to decline, although traders said the trend was not significant enough to have a major impact on expectations.

The independent Getúlio Vargas Foundation said the IGP-M increased 0.18% during the first 10 days of February, versus 0.20% in the same period of January and just above estimates for 0.15%.

Also, São Paulo’s Fipe research institute reported that consumer inflation in that city rose 0.52% during the four weeks ended in early February, down from 0.56% for the calendar month of January.

However, neither figure is likely to have much effect on the hawkish central bank, which is still projected to hike interest rates at next week’s monetary policy meeting to bring inflation in line with its 2005 targets.

Shares of Banco Bradesco advanced, after Portugal’s Banco Espí­rito Santo SA said it raised its stake in Bradesco to 6.74% from 3.56%.

Elsewhere, Mexican issues ended just barely higher after a U.S.-fueled rally petered out late in the session, but the market still managed to achieve a new closing high.

In economic news, the Bank of Mexico left its monetary policy unchanged at the first of its two monthly meetings, holding its money market liquidity restriction, or “corto,” unchanged at 75 million pesos.

The decision was expected following data released Wednesday that showed no increase in January’s Consumer Price index.

Also, Mexico’s industrial production rose 3.8% in 2004 from the year prior, for the first growth since 2000. December’s industrial output gained 3.9% from the year ago and 0.77% from November following adjustments for seasonal effects.

Turning to research, an influential brokerage downgraded Mexican mining company Grupo Mexico SA’s stock to “peer perform” from “outperform” after the value of its shares doubled in the past year.

Meanwhile, Argentine bourses strengthened further, for a seven-day winning streak on continued optimism regarding the government’s ongoing US$ 103 billion debt restructuring.

On an intraday basis, the benchmark Merval Index cracked the 1,500-point level for the first time in peso terms, but volatility kept it from closing above that level.

Analysts said that numbers emerging on bondholder acceptance for the debt swap are raising hopes it will secure agreement from upward of 70% of creditors.

Late yesterday, Economy Minister Roberto Lavagna said the acceptance rate as of Wednesday was 37.3%, only a mild improvement over the 36.8% at the midpoint on February 4.

However, he added that the 35-year par bond was oversubscribed at 108%, topping estimates among market participants who viewed heavy selling by small bondholders to hedge funds as an indication that initial acceptance rates would be low.

In earnings reports, Argentine real estate developer IRSA-Inversiones y Representaciones SA announced that its net profit reached ARS56.67 million for the six months ended December 31, up from ARS32.413 million one year before.

Although IRSA did not supply a further breakdown of its results, the company usually releases a more detailed report after its initial filing.

Thomson Financial Corporate Group



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