October 10, 2018 / 7:44 PM / 7 months ago

EMERGING MARKETS-Latam FX and stocks weaken, Brazil's real ends winning streak

    By Susan Mathew and Claudia Violante
    Oct 10 (Reuters) - Latin American stocks and currencies
weakened on Wednesday, with Brazil's real currency breaking a
seven-day winning streak as investors were rattled by federal
prosecutors starting a probe into allegations of fraud against
presidential front-runner Jair Bolsonaro's chief economist.     
    The real fell more than 1 percent, breaking its
longest winning streak since November 2011 on news of the
investigation into claims Paulo Guedes mismanaged 1 billion
reais ($266.6 million) that public pension funds put in his
investment vehicles starting in 2009.
    The real had gained more than 9 percent over the last seven
sessions on optimism that Bolsonaro would win the second-round
vote and address the country's urgent economic issues with
Guedes' help.
    Investor nerves were further frayed by Bolsonaro saying he
was unwilling to sell power generation assets, suggesting he
could dial back on a key campaign promise to privatize some
state-controlled companies.
    "The recent statements by Bolsonaro ... indicate less
privatization impetus than Guedes, and raises doubts about the
viability of the main reforms," ​​said Evandro Buccini, chief
economist at Rio Bravo Investments.
    Shares of state-run power company Eletrobras
 tumbled as much as 14.9 percent on the comments
before cutting some losses to trade 7.5 percent lower, taking
the benchmark stock index down more than 2 percent.    
    Argentina's peso weakened for the first time in four
sessions on fears of risk associated with the central bank's
mechanism for mopping up liquidity and curbing dollar demand.
    The central bank started selling short-term debt called
leliqs at rates as high as 74 percent since last week.
    But, after repeated warnings from analysts that the sale of
leliqs worth billions of pesos would not be sustainable,
investors worried about the growing indebtedness of the bank as
it continues to sell notes.
    The Mexican peso continued its slide, in line with
broader emerging market counterparts. MSCI's emerging market
currency index was marginally lower.  
    Stock indices also fell, with Buenos Aires' Merval index
 down 2.2 percent to its lowest in a month, while
Mexico's IPC shed more than half a percent, following a
slide in global equities.
    Key Latin American stock indexes and currencies at 1909 GMT:
 Stock indexes                          Daily %      YTD %
                                         change     change
 MSCI Emerging Markets          993.99    -0.15      -14.2
 MSCI LatAm                    2753.90     0.21      -2.63
 Brazil Bovespa               84111.17     -2.3      10.09
 Mexico IPC                   48165.08     -0.7      -2.41
 Chile IPSA                    5244.97    -1.19      -1.19
 Argentina MerVal             28942.59    -2.26      -3.74
 Colombia IGBC                12393.36    -0.91       8.99
 Currencies                             Daily %      YTD %
                                         change     change
 Brazil real                    3.7600    -1.32     -11.88
 Mexico peso                   19.1210    -0.43       3.02
 Chile peso                      686.3    -0.86     -10.44
 Colombia peso                    3093    -1.06      -3.59
 Peru sol                        3.328    -0.06      -2.73
 Argentina peso (interbank)    37.1200     0.05     -49.89
 Argentina peso (parallel)          37     1.35     -48.03
 (Reporting by Susan Mathew in Bengaluru and Claudia Violante in
Sau Paulo; editing by Jonathan Oatis)
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