July 5, 2018 / 3:00 PM / 14 days ago

EMERGING MARKETS-Brazil stocks drop as Embraer deal disappoints

    SAO PAULO, July 5 (Reuters) - Brazilian equities dropped
sharply on Thursday, despite a solid day for many other regional
markets, as a dramatic fall in shares of planemaker Embraer SA
 and widespread profit-taking dragged down the
benchmark Bovespa index.
    All eyes were on Embraer after Boeing Co announced in
the morning that it would buy a controlling stake in the
Brazilian firm's commercial aircraft arm. The deal, which has
been closely followed by traders since news of talks first broke
in December, disappointed many by implicitly valuing Embraer's
commercial unit at $4.75 billion, below analysts' expectations.

    "Our initial take - lower than expected valuation for the
Commercial Aviation segment but still an upside to Embraer's
current price," analysts at BTG Pactual wrote in a note.
    Embraer shares tanked 9.9 percent in morning trade, their 
biggest intraday loss since July 2016, accounting for nearly a
third of the Bovespa's fall.
    Brazil's heavily weighted banking sector also dragged on the
index, with Banco Bradesco SA and Itau Unibanco
Holding SA falling 2 percent and 1.9 percent,
respectively. 
    Like other sectors, banking stocks have risen significantly
in recent days.
    "The stock market has risen for five straight sessions,
without a lot of news, so there's space to take some profits,"
said Vitor Suzaki, an analyst at Sao Paulo-based Lerosa
Investimentos.
    Overall, the index fell 0.5 percent in morning trade.
    Elsewhere in the region, Mexico's IPC equities index
was the only major market also in the red, off 0.46 percent,
under pressure from major stocks such as Grupo Televisa SAB
 and bottler Coca-Cola Femsa SAB de CV.
    Chile's IPSA was the major positive standout, up
0.49 percent, after the country's central bank said Chile's
economic activity rose 4.9 percent in May from a year ago, well
above market expectations of 4 percent.
       
Key Latin American stock indexes and currencies at 1422 GMT:  
    
 Stock indexes                           daily %     YTD %
                             Latest       change    change
 MSCI Emerging Markets         1051.95     -0.39     -8.84
                                                  
 MSCI LatAm                    2475.21     -0.46    -12.08
                                                  
 Brazil Bovespa               74367.33      -0.5     -2.66
                                                  
 Mexico IPC                   47102.11     -0.46     -4.56
                                                  
 Chile IPSA                    5269.45      0.49     -5.30
                                                  
 Chile IGPA                   26702.64      0.42     -4.57
                                                  
 Argentina MerVal             27702.88         0     -7.86
                                                  
 Colombia IGBC                12444.93      0.25      9.45
                                                  
                                                          
 Currencies                              daily %     YTD %
                                          change    change
                                Latest            
 Brazil real                    3.9294     -0.47    -15.68
                                                  
 Mexico peso                   19.2925      0.82      2.11
                                                  
 Chile peso                      656.3     -0.75     -6.35
                                                  
 Colombia peso                  2888.9      0.53      3.22
 Peru sol                        3.292     -0.06     -1.67
                                                  
 Argentina peso                28.0800      0.07    -33.76
 (interbank)                                      
                                                  
 Argentina peso                   28.9      0.35    -33.46
 (parallel)                                       
                                                  
 

 (Reporting by Gram Slattery and Paula Arend Laier; Editing by
Dan Grebler)
  
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