August 22, 2017 / 3:46 PM / a year ago

EMERGING MARKETS-Brazil stocks hit six-year high on Eletrobras privatization

    By Bruno Federowski
    SAO PAULO, Aug 22 (Reuters) - Brazilian stocks on Tuesday
shot to a six-year high after the government unveiled plans to
privatize power utility Centrais Elétricas Brasileiras SA,
spurring demand for state-run firms.
    The benchmark Bovespa stock index rose 2.3 percent,
breaching the 70,000 threshold for the first time since January
    Common shares in Eletrobras, as the power utility
is known, rose as much as 40 percent in their biggest daily
advance since 1993. 
    Late on Monday, Brazil floated a proposal to cede control of
the country's biggest power utility, the boldest privatization
yet amid a string of public asset sales and infrastructure
concessions. The deal could fetch up to 20 billion reais ($6.4
billion), an official said.
    Analysts at Itaú BBA estimated the privatization could
generate "at least 40 billion reais" in value through
cost-cutting, asset sales and other optimization efforts. Still,
the transaction will face sharp political opposition, they said.
    The share move tightened the spread of preferred shares over
common shares to the smallest in a month as traders anticipated
higher dividend payouts after privatization.
    Shares of other state-controlled companies also rose, with
those holding Eletrobras debt leading the upswing. Shares of
lender Banco do Brasil SA rose 4.2 percent, while oil
company Petróleo Brasileiro SA jumped 3.6 percent.
    "The transaction is good news for state-owned firms as a
whole. In particular, expectations of better management and
incoming funds (at Eletrobras) are good news for Banco do
Brasil," Lerosa Investimentos equity analyst Vitor Suzaki said.
    Brazil's stock market led the gains in Latin America, with
all regional benchmark indexes trading up. The Brazilian
currency also strengthened as investors hoped proceeds
from the transaction could help the government to meet its
fiscal targets.
    Most Latin American currencies firmed, tracking a rally in
metal prices ahead of a meeting of central bankers in Jackson
Hole, Wyoming, later this week. The Mexican peso was up
for a third straight day, while the Chilean peso
touched a new six-month high.
    Federal Reserve Chair Janet Yellen on Friday is expected to
provide further clues on the Fed's plan to roll back the
extraordinary stimulus it introduced to fight the global
financial crisis, removing a key driver of demand for emerging
market assets.
    Key Latin American stock indexes and currencies at 1500 GMT:
 Stock indexes                                 daily %   YTD %
                                     Latest     change  change
 MSCI Emerging Markets               1072.34      0.82   23.36
 MSCI LatAm                          2862.05      1.33   20.67
 Brazil Bovespa                     70218.55      2.31   16.59
 Mexico S&P/BVM IPC                 51325.65      0.16   12.45
 Chile IPSA                          5108.75      0.14   23.06
 Chile IGPA                         25536.27      0.16   23.16
 Argentina MerVal                   23010.43      0.19   36.01
 Colombia IGBC                      10968.72      0.34    8.30
 Venezuela IBC                     196808.75      0.45  520.75
 Currencies                                    daily %   YTD %
                                                change  change
 Brazil real                          3.1498      0.57    3.16
 Mexico peso                         17.6175      0.21   17.75
 Chile peso                            641.2      0.23    4.60
 Colombia peso                       2984.56     -0.05    0.57
 Peru sol                              3.238      0.03    5.44
 Argentina peso (interbank)          17.2000      0.41   -7.70
 Argentina peso (parallel)             18.22      0.44   -7.68
 (Reporting by Bruno Federowski; Editing by Andrea Ricci)
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