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MARKET SAVVY

Latin American Stocks End Losing Streak as Fears Ease

May 27, 1999|From Reuters

SAO PAULO, Brazil — Latin American stocks broke a prolonged losing streak Wednesday as pessimism over the outlook for Argentina's currency and concerns over a fresh scandal in Brazil were replaced by cautious optimism.

Brazilian shares led the rally, with stocks closing up 6.1% and the country's currency, the real, rising 1.8% against the dollar as investors began to look beyond the latest rumors.

Markets already unnerved by speculation that neighboring Argentina could be forced to devalue its peso had taken another hit Tuesday when a newspaper reported that Brazilian President Fernando Henrique Cardoso authorized officials to pressure potential bidders ahead of last July's privatization of the Telebras telecommunications system. Sao Paulo's benchmark Bovespa index sank 5%, bringing five-day losses to 14%.

"The market exaggerated the potential effect of these issues," said Paulo Rezende, a fund manager at Maxima brokerage. "Now investors are evaluating the situation with calm and focusing on the fundamentals, which are positive."

The real closed higher for the first time in five days at 1.703 per dollar.

A turnaround in investor sentiment also sent Argentine stocks up after a market holiday Tuesday. The Merval index rose 4.3%, boosted by the strong performance in Brazil and by a 1.6% climb by blue chips on Wall Street.

Emerging-market bonds were up about one point as fear of an Argentine currency devaluation receded, replaced by hope that the country will pass a law limiting its budget deficit.

In Chile, the benchmark stock index rose 2.8%, while Mexico's key index was up 3.3%

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