October 29, 2018 / 8:17 PM / 19 days ago

CORRECTED-EMERGING MARKETS-Brazil pares gains; Mexico's stocks near 2-year low

 (Corrects percentage changes in table)
    By Susan Mathew
    Oct 29 (Reuters) - Brazil's real and stocks gave up gains on
Monday, as initial euphoria following Jair Bolsonaro's
presidential win gave way to caution over implementation of his
promised policy reforms, while Mexico's stocks hit a near
two-year low after a vote to scrap a partially built airport in
Mexico City soured sentiment.
    The MSCI index of Latin American stocks fell
3.6 percent in its biggest one-day loss in a year and a half,
reversing gains and an outperformance of the broader emerging
market stock index earlier in the day.
    Brazil's Bovespa stock index fell 1.8 percent, after
earlier hitting an all-time high, led by losses in material
stocks. The currency slipped from a five-month peak and
was on track to post its biggest daily fall in eight weeks.
    Both had gained more than 14 percent since mid-September
when polls started showing market-favorite Bolsonaro in the
lead.
    "After all the words, action must now follow," You Na
Park-Heger, an analyst with Commerzbank, said in a note, adding
that "there are a number of risks."
    Park-Heger cited the recent disagreement over privatization
and taxation between Bolsonaro and his market-admired economy
adviser Paulo Guedes.
    "It therefore remains to be seen to what extent Bolsonaro
will give Guedes a free hand. Should there be more disagreements
between the two, this would probably burden the real,"
Park-Heger said.
    Mexican stocks sunk close to 4 percent, and the peso
 tumbled 3.6 percent, on pace to log its worst session
since the election of U.S. President Donald Trump in November
2016.
    Mexican President-elect Andres Manuel Lopez Obrador said his
government would scrap the completion of a partially built $13
billion new airport for Mexico City when he takes office on Dec.
1, after citizens called for abandoning the project in a
referendum.
    Analysts say that scrapping the airport could prompt an
interest rate hike by the central bank at its next meeting to
support the peso, and cause violation of international treaties
and loss of contracts for companies.
    "Lot of concern will be over the policy tact of the new
government, and this vote is being taken as a negative sentiment
indication on that front," said Sacha Tihanyi, deputy head of
emerging markets strategy at TD Securities.
    Shares of airport operators ASUR shed 4.6
percent, while those of GAP declined 3.2 percent. 
    Also on Monday, U.S. officials said thousands of U.S. troops
may be headed to the border with Mexico to stop a caravan of
migrants trekking toward the United States. 
    Trump had threatened to close the border if Mexico did not
stop the illegal migration - an issue he says is more important
to him than the new trade deal with Mexico an Canada.
    Meanwhile, the Argentine peso and the Merval stock
index pared gains. A decision by the International
Monetary Fund to increase the size of standby financing to the
recession-hit country to $56.3 billion from the initial $50
billion agreed in June had given a boost to
sentiment. 
    But a stronger dollar and a downturn on Wall Street overtook
sentiment, with investors wary of betting on a turnaround in
risk amid heightened worries over corporate earnings and global
growth.            
    
    Key Latin American stock indexes and currencies at
 Stock indexes                 Latest   Daily %       YTD %
                                         change      change
 MSCI Emerging Markets          931.90    -0.50       -19.3
                                                 
 MSCI LatAm                    2589.93    -2.40       -7.25
                                                 
 Brazil Bovespa               84146.90    -2.27        9.67
                                                 
 Mexico IPC                   44025.00    -4.20      -11.09
                                                 
 Chile IPSA                    5064.16    -1.17       -1.17
                                                 
 Argentina MerVal             29038.97    -1.60       -3.88
                                                 
 Colombia IGBC                12442.27    -0.11        9.42
                                                 
                                                           
 Currencies                             Daily %       YTD %
                                         change      change
                                Latest           
 Brazil real                    3.7155    -1.71      -10.82
                                                 
 Mexico peso                   20.0960    -3.69       -1.98
                                                 
 Chile peso                      690.3    -0.58      -10.96
                                                 
 Colombia peso                    3185    -0.25       -6.37
 Peru sol                        3.354    -0.18       -3.49
                                                 
 Argentina peso (interbank)    36.9000    -0.04      -49.59
                                                 
 Argentina peso (parallel)          36     2.08      -46.58
                                                 
 
         

 (Reporting by Susan Mathew in Bengaluru; Editing by Leslie
Adler)
  
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