March 20, 2020 / 7:55 PM / 20 days ago

EMERGING MARKETS-Latam stocks mark worst week since 2008 crisis, FX muted

    * MSCI's Latam stocks index down 22% for week
    * Brazil's real comes off record lows
    * Chile stocks fall despite fiscal measures

 (Adds details, updates prices)
    By Ambar Warrick and Susan Mathew
    March 20 (Reuters) - Latin American stocks marked their
worst week since 2008 as the economic outlook for the region
worsened in face of the coronavirus outbreak, while most
currencies trended lower on Friday. 
    Brazil stocks fell 2.4%, shedding earlier gains
after Latin America's largest economy slashed its 2020 economic
growth forecast to zero from 2.1% previously, due to the
perceived hit from the outbreak.
    The country also declared a state of emergency over the
virus.
    The MSCI's index of Latin American stocks
was down roughly 22% for the week, its worst since 2008. Stocks
in Mexico and Chile also retreated for the day.
    Week-long losses in currencies were somewhat curbed by a
pause in the dollar's rally, after major central banks pledged
dollar liquidity measures amid a mad rush to the greenback.

    The real rose about 1%, while the Mexican and
Argentine pesos fell 0.6% each. The MSCI's index
of Latin American currencies, while ticking up
slightly for the day, was set for its worst week since
late-2016. 
    "In Brazil, its central bank appears well-prepared to deploy
its ample intervention potential to ensure the liquidity of FX
markets," Gustavo Rangel, chief economist, LATAM, at ING, wrote
in a note.
    " Ultimately, much should depend on the ability of local
economies to prevent the ongoing liquidity crunch... But not
every country has the capacity to deploy resources effectively
while ensuring that the necessary short-term fiscal  weakening
does not translate into permanent damage." 
    A Reuters poll showed the global economy is already in
recession, which bodes poorly for the risk appetite-driven
assets in emerging markets.
    Developing world stocks and currencies
 found some short-lived relief after the U.S.
Federal Reserve on Thursday opened currency swap lines with nine
central banks, including some in emerging markets. 
    Chile's government Thursday announced an $11.7 billion
package of emergency measures aimed at saving jobs and
protecting small businesses. The move came just hours after the
International Monetary Fund said governments should take
decisive action to limit the pandemic's impact.
 
    In Brazil, confirmed coronavirus cases more than doubled in
two days, while a diplomatic spat over the virus' origins
between President Jair Bolsonaro's son and the Chinese
ambassador threatened relations with Brazil's top trading
partner.
    Argentina's peso, which weakened about 1% for the week, has
remained somewhat insulated to the market rout thanks to capital
controls that have been in place since a bailout by the IMF in
2018. 
    But the seeming out-performance masks rising tension in the
currency stemming from a divergence in the black market and
official spots rates.
    
    Key Latin American stock indexes and currencies at 1926 GMT:
    
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets          802.10      4.66
                                        
 MSCI LatAm                    1474.11     -1.37
                                        
 Brazil Bovespa               66576.74     -2.57
                                        
 Mexico IPC                   34062.93     -3.08
                                        
 Chile IPSA                    3075.96     -0.18
                                        
 Argentina MerVal             23776.78     4.945
                                        
 Colombia COLCAP                916.57      1.87
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    5.0467      1.10
                                        
 Mexico peso                   24.2220     -0.82
                                        
 Chile peso                      863.1      0.01
                                        
 Colombia peso                 4118.75     -0.77
 Peru sol                       3.5278      0.74
                                        
 Argentina peso                63.7000     -0.58
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; Editing by Alexander
Smith and Tom Brown)
  
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