October 29, 2018 / 2:54 PM / 9 months ago

EMERGING MARKETS-Brazil rides high on Bolsonaro win, Mexico hit by airport vote

    By Susan Mathew
    Oct 29 (Reuters) - Brazil stocks hit an all-time high on
Monday, and the real touched a five-month top despite a stronger
dollar after market-favored presidential candidate Jair
Bolsonaro cruised to a victory, while Mexico's peso tumbled
after a vote to scrap a partly-built airport in Mexico City.
    MSCI's index of Latin American stocks
climbed 1 percent compared to a 0.3 percent rise in the wider
emerging market stock index, where gains were capped
by signs of cooling in China's economy.
    Brazil's Bovespa jumped as much as 3 percent, before
easing to trade 1.44 percent higher, with gains being led by
financial stocks.
    The real also trimmed some gains and last stood at
3.62 per dollar, firmer by 0.4 percent. Analysts have said the
real's gains might be limited as Bolsonaro's victory was priced
in, with the focus now on the implementation of his promised
reforms such as shrinking public debt and lowering rates.

    Both the currency and the stock index have gained more than
15 percent since mid September, when polls started sharply
favoring Bolsonaro.
    "I think a greater visibility of what the new government
will be can attract foreigners back. For the locals, as
long-term interest rates recede, allocations should increase,"
said Carlos Sequeira, a strategist at BTG Pactual.
    Brazil's central bank is expected to leave the benchmark
interest rate unchanged at 6.5 percent at a meeting on
Wednesday. President Ilan Goldfajn has said rates would only
rise on a worsening balance of risks and inflation expectations.

    Meanwhile, the Mexican peso was on track for its
steepest daily decline in nearly two years, after citizens voted
to scrap a partly-built $13 billion airport in Mexico City in a
public consultation.
    The cancellation would cost about 120 billion pesos ($6.1
billion), the Grupo Aeroportuario de la Ciudad de México, which
has been handling the project, said earlier this year.
    "In this scenario we think the central bank would increase
the overnight rate by at least 25 basis points in its next
monetary policy meeting ... to try to arrest possible peso
depreciation," analysts at Credit Suisse said in a note.
    Incoming president Andres Manuel Lopez Obrador had sought
the unconstitutional consultation as he believed the project was
corruption-tainted and would cost more than estimated. This had
investors and analysts concerned about violation of
international treaties and companies losing contracts if the
project were scrapped.

    Key Latin American stock indexes and currencies at 1433 GMT:
 Stock indexes                 Latest    Daily %      YTD %
                                          change     change
 MSCI Emerging Markets          942.88      0.35      -18.9
 MSCI LatAm                    2722.71      1.31      -4.97
 Brazil Bovespa               86995.55      1.49      13.87
 Mexico IPC                   45335.18     -1.02      -8.14
 Chile IPSA                    5140.45      0.32       0.32
 Argentina MerVal             29696.54      1.11      -1.23
 Colombia IGBC                12480.59       0.2       9.76
 Currencies                              Daily %      YTD %
                                          change     change
 Brazil real                    3.6275      0.68      -8.66
 Mexico peso                   19.8030     -2.27      -0.53
 Chile peso                      686.8     -0.07     -10.51
 Colombia peso                 3179.53     -0.08      -6.21
 Peru sol                        3.349     -0.03      -3.34
 Argentina peso (interbank)    36.8500      0.09     -49.53
 Argentina peso (parallel)        36.5      0.68     -47.32

($1 = 19.7670 Mexican pesos)

 (Reporting by Susan Mathew in Bengaluru and  Paula Arend Laier
in Sau Paulo; Editing by David Gregorio)
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