SANTIAGO, Chile, Dec. 6 (UPI) -- Markets were mixed in volatile and thin trade across Latin America this week, as new banking rules in Argentina and worry the country is heading for a devaluation or a default kept skittish investors on the sidelines.
Wild swings ruled Argentina´s MerVal stock index, as investors scrambled in response to announcements from government officials.
After registering lows not seen in a decade, the index saw a big bounce after a weekend announcement the country was partially freezing bank accounts and taking other measures to halt a panicked run on financial institutions.
Juan Pablo Baylac, a spokesman for President Fernando de la Rua, said earlier this week, "Argentina is going to win this battle because the people are going to understand."
When pressed about what the people might understand, Baylac said he was speaking of a "change of habit, a change in culture."
Argentina reported it swapped some $41 billion in local debt for bonds carrying significantly lower interest rates. The foreign portion of the debt swap is set to get underway in two months.
In response to questions about the banking rules, set to last 90 days, de la Rua said Wednesday the government was "going to analyze the flexibility of the measures."
Indeed, while stock markets in the region cheered the moves, the judiciary in Argentina raised questions about their constitutionality.
The MerVal index in Argentina ended last Thursday with no where to go but up. The index touched upon its lowest numbers in a decade, closing at 200.86, a loss of 5.24 percent.
Ill political winds and renewed fears of default sent the index on its downward spiral. Fears of default, devaluation lingered Friday, but investors braved chilly waters and sent the MerVal into the weekend 0.79 percent higher at 202.45. There was little news to keep the index in the black for the day, and investors sensed government action of some sort was coming.
Monday, the first session after officials announced the new banking measures, saw the index rebound, posting a 6.07 percent gain to 214.75. Trading was thin but investors were happy to see the government intervention end the run on financial institutions, which saw banks lose $1 billion in deposits just before the weekend.
Reports on Tuesday the IMF was not going to make its expected aid payment to Argentina, due this month, sent the MerVal down 1.2 percent to 212.16 in light trading. The loss could have been worse, but investors took to heart the relatively calm public reaction to the banking measures.
The MerVal bounced 8 percent to 229.18 Wednesday as the trading floor got whiffs of "dollarization" rumors and talk the IMF was going to cough up its $1.3 billion aid payment.
The jump was a bit deceptive, as many traders were snatching up local stocks with the intention of converting them into U.S.-traded American depositary receipt shares, which could then be sold for dollars. Anything to get a greenback was the battle cry in Argentina.
Brazil´s Bovespa index maintained its optimistic outlook during the week, despite the volatile woes out of Argentina, to which the country is tightly tied through trade.
Last Thursday, the Bovespa fell, mostly in reaction to the steep declines in Argentina. The index ended down 2.17 percent at 12,736 as fear gripped investors who were thinking the worst about default possibilities in Argentina.
Friday ended a strong November for the Bovespa, as it gained more than 13 percent during the month. On the day, the index was up 1.53 percent at 12,931.7. Telemar, which makes up nearly 15 percent of the index, gained 1.7 percent on the day.
Monday saw the Bovespa take Argentina´s lead and decide the new banking measures in that country were beneficial, as a 3.1 percent jump pushed the index up to 13,336. There were 51 gainers on the day, with five issues falling. State owned oil company Petrobras gained 4 percent.
The Bovespa was down 1.4 percent at 13,146.6 on Tuesday, mostly on profit taking and Argentine jitters. Showing a little restraint in the face of Argentina's huge gain, the Bovespa on Wednesday rose a modest 1.79 percent to 13,382.13.
Telecommunications issues led the day, while Petrobras also was up nicely as International banker Francisco Gros was named to take over the helm of the company, Latin America´s third largest crude producer. Up some 30 percent since the beginning of October, the index continues to assert its independence against a default of its neighbor, but it is difficult to break the trade ties that bind the two nations.
Chile´s IPSA index was up and down for the week, but mostly unaffected by the woes in neighboring Argentina. Last Thursday, in the wake of 10-year lows in Argentina, the index ended just 0.06 percent down to 109.54.
Market heavyweights, such as Telefonica CTC Chile and the power company Endesa, were hit hard, but investors bought up low-priced issues to even the day. Cautious bargain hunters pushed the IPSA higher Friday, as it ended up 0.35 percent at 109.93. The index dropped about 3 percent for the week.
Showing its true colors, the index dropped on Monday, despite nice gains in Argentina and Brazil, with investors fretting about woes on Wall Street. The IPSA ended down 0.61 percent to 109.26. U.S.-listed stocks hurt the index, as investors in New York see an Argentine collapse bring Chile down as well.
Tuesday saw the IPSA flat, 0.11 percent to 109.38. Profit taking affected the day, as did some concerns about Argentina. Telefonica rose 1 percent to lead the session. Like Brazil, the IPSA reacted calmly to the furious rise in Argentina on Wednesday. The index ended up 0.98 percent to 110.45. Shares in retailer Almacenes Paris rose more than 2 percent.
Mexico was mixed for the week, as worries about the U.S. economy and the eternal question of whether much-desired tax reforms will pass weighed on investors. The country largely is unaffected by the Argentine crisis, yet questions abound as to whether it is retaining its Latin American "darling" status as Brazil continues to climb.
On Thursday, the IPC index ended down 0.12 percent at 5,841.34. Telefonos de Mexico (Telmex) created the biggest waves on the day, as Latin America´s largest publicly traded company said it was spending $400 million for a 39 percent chunk of troubled XO Communications, a data and voice services company in the U.S. Telmex ended 0.5 percent lower on the day. Friday saw the IPC ending slightly down at 5,832.83, a 0.14 percent drop. Shares in Telmex, which makes up 15 percent of the index, continued to drop and ended about 1.5 percent down.
Monday brought modest gains for the IPC, as it closed up 0.65 percent to 5,870.93. Latin America´s largest wireless operator, America Movil, led the day, finishing 1.26 percent higher.
Media and retail issues led the index on Tuesday, as it rose 1 percent to 5,931.43. Wal-Mart de Mexico closed 1.72 percent higher, while shares of broadcaster TV Azteca gained 3.93 percent. Telecoms pushed the IPC up 2.8 percent Wednesday, as America Movil jumped 4 percent. The index ended the day at 6,099.28, its highest close since early September.
Venezuela´s IBC index was up and down for the week, closing at 6,323 Thursday, then jumping to 6,379 on Friday. The index dropped more than 65 points to 6,313.7 Monday, then dropped further to 6,288.8 Tuesday. The index continued its skid on Wednesday, shedding 1.23 percent to end at 6,211.4.
