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Bonds News

EMERGING MARKETS-Fiscal woes weigh on Brazil's real; Latam stocks track Wall St lower

 (Updates prices)
    By Sagarika Jaisinghani and Susan Mathew
    Sept 29 (Reuters) - Brazil's real gave up gains and stocks
in Sao Paulo hit three months lows on Tuesday after a new fiscal
aid in the country package raised worries of the government
overshooting the spending limit. 
    The real fell 0.1% as President Jair Bolsonaro
defended the a new minimum income program called Renda Cidada,
which translates as "Citizen Income". 
    Analysts at XP Investimentos say the new program lacks
details on prioritizing expenses. 
    Brazil's real has fallen to record lows this year and is
among the worst performing emerging market currencies, with the
biggest concern being the economy's fiscal standing. Latest data
showed the government posted a primary budget deficit of 96.1
billion reais ($17 billion) in August as emergency spending
continued.
    The Bovespa stock index fell 1% on financials' drag.
    
    Mexico's peso was flat against a weaker dollar before
the first U.S. presidential debate due on Tuesday between U.S.
President Donald Trump and Democratic challenger Joe Biden.

    "As we get closer to the U.S. elections, volatility will
likely spike up as market participants reduce risk exposure in
what might be a more contested race than currently priced in,"
said Claudio Irigoyen, Latam fixed income and currency economist
at BofA Securities. 
    "We forecast the Latam GDP to decline 8.1% in 2020 and then
increase 3.6% in 2021."
    The Colombian peso declined and stocks there
 hit an over 5-week low after President Ivan Duque said
Colombia will extend a so-called selective quarantine for the
duration of October.
    In line with weakness on Wall Street, most other Latam
stocks fell, with those in Mexico and Chile
declining for the first time in four days.
    But local demand for equities in Brazil remains strong,
BofA's Irigoyen said, adding that e-commerce, proteins and
defensive plays in Mexico would be BofA's picks.
    A basket of Latin American equities tumbled
1.2% in its second consecutive day of losses. The index is also
set for its biggest monthly percentage decline since the
coronavirus-driven crash in March.
    U.S. private equity firm Advent International said on
Tuesday it had raised a $2-billion fund to invest in Latin
American companies, hoping to target assets made cheaper by
depreciation in local currencies.
    In Argentina, the peso was flat. Argentina will
make interest payment due on dollar and euro-denominated "Par"
bonds on Wednesday this week, the country's Economy Ministry
said in a statement on Monday, closing off an unresolved issue
from its recent major debt revamp.
        
    Key Latin American stock indexes and currencies at 1914 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1069.43    -0.04
                                   
 MSCI LatAm               1804.04    -1.12
                                   
 Brazil Bovespa          93766.47    -0.95
                                   
 Mexico IPC              37156.38     -0.2
                                   
 Chile IPSA               3555.30    -1.12
                                   
 Argentina MerVal        41688.37   -0.926
                                   
 Colombia COLCAP          1166.28    -0.88
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.6399    -0.10
                                   
 Mexico peso              22.4081    -0.06
                                   
 Chile peso                 783.8     0.08
                                   
 Colombia peso             3885.2    -0.36
                                   
 Peru sol                  3.5977    -0.25
                                   
 Argentina peso           76.1100    -0.07
 (interbank)                       
                                   
 
 (Reporting by Sagarika Jaisinghani in Bengaluru; additional
reporting by Luana Maria Benedito in Sao Paulo, Aaron Saldanha
in Gurugram and Divya Chowdhury in Mumbai
Editing by Alistair Bell and Nick Zieminski)
  
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