March 4, 2019 / 6:24 PM / 6 months ago

EMERGING MARKETS-Latam FX range bound in holiday trading, rating risk weighs on Mexico

    By Agamoni Ghosh
    March 4 (Reuters) - Most Latin American currencies were
range bound in low volume holiday trading on Monday, while stock
indices in the region were mixed even as other emerging market
peers rose on optimism over the United States and China nearing
a trade deal. 
    U.S. President Donald Trump and Chinese President Xi Jinping
might seal a trade deal around March 27, given progress in trade
talks, the Wall Street Journal reported on Sunday.
    Indices in the region did not benefit as much from the trade
optimism, as MSCI's index for Latin American stocks
 slid and trading volumes remained muted with
Brazil and Argentina shut for the Carnival. 
    Mexico's peso, as well as stocks, fell after
Standard & Poor's revised their credit outlook to "negative"
from "stable" for the country late Friday. 
    The ratings agency warned the country could suffer a
downgrade during the coming year given the risk of lower growth
and higher contingent liabilities of the Andres Manuel Lopez
Obrador-led government.
    "In the near-term we could see some downward pressure on the
peso in the coming days," said Christian Lawrence, senior market
strategist, LatAm, Rabobank. 
    "As for the sovereign rating, we anticipate the first
downgrade to come by this year itself, second-half most likely,"
he said.
    The primary ratings risk for Mexico comes from the mounting
debt of state-run oil firm Pemex, which was double-downgraded
last month to the last rung of investment grade by Fitch, and
market analysts expect further downgrades this year. 
    The government relies on Pemex to provide around 15 percent
of total tax revenue as the company struggles under the weight
of nearly $106 billion in debt, the highest of any national oil
company in Latin America.
    Even as Brazilian markets remained shut, the U.S listed
shares of Vale fell as much as 3 percent after its CEO
Fabio Schvartsman and three other executives resigned over the
    Stocks in Chile fell to a two-month low,
dragged by lithium producer SQM after a brokerage
cut price targets on the stock.
    Colombia's IGBC index bucked the trend and rose 0.3
percent with energy firm Ecopetrol SA riding on the
back of higher oil prices. 
    Key Latin American stock indexes and currencies at 1800 GMT
 Stock indexes                             daily %
                               Latest       change
 MSCI Emerging Markets           1052.27      0.07
 MSCI LatAm                      2772.64     -0.11
 Brazil Bovespa                        -         -
 Mexico IPC                     42247.29     -0.87
 Chile IPSA                      5236.11     -0.73
 Argentina MerVal                      -         -
 Colombia IGBC                  12340.79      0.29
 Currencies                                daily %
 Brazil real                           -         -
 Mexico peso                     19.3030     -0.14
 Chile peso                        658.8      0.09
 Colombia peso                   3094.56      0.02
 Peru sol                          3.313     -0.15
 Argentina peso (interbank)            -         -

 (Reporting by Agamoni Ghosh in Bengaluru
Editing by Chris Reese)
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