Markets

EMERGING MARKETS-Latam currencies, stocks rise for fourth straight day

* Brazil’s economy to remain weak in 2023 – poll * Mexico’s economy shrinks in November from October * Sri Lanka holds interest rates * Latham shares at 2-month high, currencies up near 1% (Updates prices, adds commentary) Author By Amruta Khandekar Jan 25 (Reuters) – Latin American stocks and currencies rose for a fourth straight session on Wednesday, with Brazil’s real at its highest in about a week, even as concerns about the country’s slowing economic growth. MSCI’s index of Latin American shares jumped 1.5% to its highest level in more than two months. Argentina’s Merval index rose 2.7%, leading gainers among its Latam peers, while Brazil’s Bovespa reversed early losses to climb nearly 1%. The Latam Currency Index rose 0.9% and the Brazilian real rose 1.2% against the dollar for a second straight session. The currency of Latham’s largest economy has risen 4% so far in 2023, compared with a 4.6% annual gain in the broader index of regional currencies. Investor sentiment among emerging market (EM) assets was boosted by China’s lifting of its tough COVID-19 rules, as well as hopes that the Federal Reserve will slow the pace of interest rate hikes as inflation eases. “Global external drivers are very strong and investors in this global context may be tempted by Brazil’s super high nominal interest rate of 13.75 percent,” said Alejo Cervonco, chief investment officer of US emerging markets at UBS Global Wealth Management. “We expect the currency to remain volatile and economic policy uncertainty to prevent significant further real appreciation.” Brazil’s slowing economy is likely to remain weak in 2023, a Reuters poll of economists showed, with markets worried that President-elect Luiz Inacio Lula da Silva’s spending spree could put Brazil’s debt on an even more unsustainable path and fuel inflation. The Chilean peso fell 0.2%, while the Colombian peso fell 0.3% against the dollar. Both countries are due to announce interest rate decisions later this week. The Mexican peso fell 0.1 percent. The country’s economy shrank by 0.5 percent in November compared to October and grew by 3.3 percent from November 2021, the national statistics agency said on Wednesday. Peruvian salt rose by 0.3%. Elsewhere, Sri Lanka’s central bank kept interest rates steady for a third straight meeting on Wednesday, as expected, saying the prevailing tight monetary stance was key to taming still-high inflation and restoring economic stability. Among the currencies of Central and Eastern Europe, the Hungarian forint rose by 0.6% against the euro, while the Polish zloty weakened by 0.1%. Polish rate maker Ludwik Kotecki said he sees room for some small rate hikes this year, but he doesn’t believe the Monetary Policy Council will decide to raise them. Greater reliance on commodity prices, volatile currencies and less recourse to countercyclical fiscal policy could push emerging Latin American countries into a sharper contraction than other developing regions, Moody’s Analytics said on Wednesday. Key Latin American Indices and Currencies at 1945 GMT: Latest Daily% Change MSSCi Markets 1041.79 0.25 MSCI Latam 2351.52 1.54 Brazil BoveSpa 114139.21 0.98 Mexico IPC 54775.88 -0.17 Argentina Merval 258902.27 2.695 Colombia Colcap 1301.56 -0.68 Daily Change 5%, Brazilian Real 0787 1.20 Mexican peso 18.8042 -0.13 Chilean peso 801.9 -0.19 Colombian peso 4527.1 -0.30 Peru sol 3.8784 0.26 Argentine peso 185.0300 Peso 185.0300 Ru ( Interbanka Repara) (Interbanka Repara) by Elaine Hardcastle)

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