August 16, 2019 / 8:58 PM / 4 months ago

EMERGING MARKETS-Latam stocks up, Argentine peso closes up before Fitch downgrade

 (Adds Fitch downgrade on Argentina, other details, updates
prices)
    By Susan Mathew
    Aug 16 (Reuters) - Most Latin American stocks rose on
Monday, joining a rebound in global markets on hopes of fiscal
and monetary stimulus in major economies, while Argentina was
handed a fresh blow as Fitch downgraded its credit rating,
pushing it deeper into junk territory. 
    Stocks in the region, besides those in Argentina, gained
between 2% and 0.4% as fiscal stimulus hopes from Germany and
China to support growth, and rising possibility of an interest
rate cut by the European Central Bank, lifted global sentiment
plagued by recession worries.  
    Meanwhile, the Argentine peso closed Friday up
4.4% in a second day of strong gains, lifted by the government's
attempt to calm markets via relief measures and collaborations
with opposition as well as central bank interventions.

    But after peso trading hours, credit rating agency Fitch
downgraded Argentina to 'CCC' from 'B' citing heightened risk of
policy discontinuity and greater likelihood of a default should
there be a change in administration after October general
elections.
    "I don't think it should have a meaningful nor lasting
effect on investors' perception of Argentina's sovereign risk,"
Alejo Czerwonko, emerging markets strategist at UBS Global
Wealth Management's Chief Investment Office.
    "The market has been reassessing the country's probability
of default since the primary elections on Sunday and I don't
think the publication provides information that investors didn't
have already."
    The peso lost a around a quarter of its value to the dollar
three days after a shock victory by the opposition in
presidential primaries raised fears of a return to populist
policies under opposition candidate Alberto Fernandez, should he
win.   
    A similar move by Moody's and Standard and Poor should not
come as a surprise, he said. 
    Argentine stocks steepened losses to hit session
lows after the announcement and closed 2.1% lower, taking the
week's losses to 31.5% - its worst week ever. 
    Mexico's peso 0.2% to 19.6475 a day after the central
bank cut its key interest rate by 25 basis points to 8%.
Mexico's President Andres Manuel Lopez Obrador on Friday said
the cut will stimulate the sluggish economy.
    But "we see little upside for MXN in the months to come as
Banxico will very likely feel comfortable cutting rates on a
potential decline of USDMXN towards 19," said Morgan Stanley
analysts in a note.
    "The shift towards yield curve behaviour and the language
around core suggest to us that Banxico will try to avoid being
behind the curve, which presents a meaningful change."
    Brazil's real fell 0.3% after 1.5% surge last session
when the central bank announced its decision to sell dollars on
the spot market for the first time in a decade. Analysts say
this is a sign the bank is finally willing to reduce its $385
billion pile of foreign exchange reserves.
    
    Key Latin American stock indexes and currencies at 0830 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets          970.27       0.7
                                        
 MSCI LatAm                    2609.83      1.19
                                        
 Brazil Bovespa               99805.78      0.76
                                        
 Mexico IPC                   39355.74      2.03
                                        
 Chile IPSA                    4799.38      0.38
                                        
 Argentina MerVal             30402.51    -2.052
                                        
 Colombia IGBC                12527.47       1.1
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.0028      0.00
                                        
 Mexico peso                   19.6475     -0.23
                                        
 Chile peso                      708.8      0.21
                                        
 Colombia peso                 3427.47      1.21
 Peru sol                        3.378      0.38
                                        
 Argentina peso                54.6000      5.13
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru and Rodrigo Campos in
New York;
Editing by Marguerita Choy)
  
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