By Carla Mozee
Major Latin American stock markets rose Wednesday, with Mexican
equities starting the second quarter on strong footing as the
country said it will seek access to credit from the International
Monetary Fund.
Mexico's IPC index gained 1.3% to 19,880.37, with shares of home
builder Homex (HXM) leading advancers with a rise of 6.6%.
The Mexican government on Wednesday said it will apply for
access to a one-year, $47 billion line of credit from the
International Monetary Fund, which, under a new flexible credit
line, extends funding to countries with solid economic policies
that are facing short-term liquidity hurdles.
Mexico's Finance Minister Agustin Carstens reportedly said in
London that Mexico's move is a precautionary one that will give it
access to funding if necessary. The move comes as Bank of Mexico
looks set to use a currency-swap facility of $30 billion with the
U.S. Federal Reserve.
IMF managing director Dominique Strauss-Kahn said in a statement
that he believes that Mexico is "an excellent candidate to pioneer
this new facility" and that he will move quickly in seeking board
approval.
Barclays Capital Research said it expects positive market
momentum on the development to continue.
"First, the line should dispel concerns about the country's
ability to face the mounting fiscal and external challenges of the
current and next year," said Latin American economists Roberto
Melzi and Jimena Zuniga at Barclays in a note Wednesday.
"Second, given that the line is oriented toward countries with a
solid macroeconomic framework, the 'stigma' traditionally
associated with tapping IMF funds has virtually been converted into
a 'seal of approval,'" they said.
The currency eased from earlier gains, recently trading at
13.902 pesos against the U.S. dollar, from 13.815 on Tuesday.
Mexico's action are driven by the country's desire to avoid
further devaluation of its currency and thus "to send a strong
signal to markets that Bank of Mexico is capable of defending its
currency," wrote Allyson Benton, Latin America analyst at political
risk-consultancy firm Eurasia Group. The central bank currently has
$79 billion in reserves.
But Mexico isn't likely to use the funds to directly finance
companies with liquidity crises on their hands, including cement
giant Cemex (CX), said Benton.
The government "will continue to encourage companies to reach
agreements with their international lenders and, if necessary, rely
on the nation's development banks, in consortium with domestic
commercial banks, to restructure corporate debt if these
negotiations fail," she said.
Shares of Cemex ended 4.4% higher, among the strongest
performers on the IPC index. Market heavyweight America Movil (AMX)
rose 1.1% and retailer Wal-Mart de Mexico (WMMVY) picked up
2.5%.
The market was also aided by gains on Wall Street, where stocks
turned around earlier losses after a slightly better-than-expected
reading on manufacturing activity, raising optimism for improved
U.S. economic conditions. The S&P 500 Index (SPX) rose 1.7% and
the Dow Jones Industrial Average (DJI) erased a triple-digit drop
to end 2% higher.
Brazil higher; Merval up on first day of new lineup
Brazilian stocks also found support from the surge on Wall
Street. Equities had declined after a report that industrial
production in Brazil rose 1.8% in February, compared with January.
Analysts polled by Dow Jones Newswires were looking for growth of
2.2%.
Shares of Petrobras (PBR) rose 3%, helping to pull the Bovespa
index up 2.6% to 41,976.33.
Stock in Companhia Vale do Rio Doce (RIO) rose 1.1%. Citigroup
on Wednesday noted that the mining giant is among two Brazilian
companies on its list of top Latin American investment ideas. The
other is Totsv SA, a software maker.
Citigroup removed brewer AmBev from the list in favor of Mexican
beverage maker Coca-Cola Femsa (KOF). AmBev (ABV) shares finished
2.4% higher.
Banking stocks also advanced. Itau-Unibanco (ITU), which was
created by the merger late last year of Itau and Unibanco, rose
1.6%.
Shares of rival bank Bradesco (BBD) gained 2.9%, and federally
run Banco do Brasil surged 5.8% after the bank was allowed to delay
the free float of its shares until June 2011 from this coming June,
according to Dow Jones Newswires.
Argentina's Merval rose 0.6% to 1,113.38 under its new lineup of
11 companies. It had carried 14 companies in the first quarter.
Shares of Tenaris (TS) rose 1.7%. The weighting for the
Luxembourg-based maker of steel tubes for the oil industry on the
Merval is now 46%, up from 35% in the first quarter.
Buenos Aires-listed shares of Petrobras finished 4.6%. Their
weighting on the benchmark is about 14%.
The three companies now off of the Merval are aluminum company
Aluar, food exporter Molinos Rio de la Plata, and Mirgor, a
producer of climate control systems for vehicles.
Next week, the first preview of the May rebalancing of the
Bovespa index is expected, according to a note earlier this week
from UBS Pactual.