EMERGING MARKETS-Colombian assets hit by junk status

    * Fitch predicted to downgrade Colombia this year- GS
    * Chilean stocks surge on SQM gains

    By Ambar Warrick
    May 20 (Reuters) - Colombia's peso and stocks tumbled on
Thursday after the country lost one of its three
investment-grade ratings, while most other Latin American
currencies rose slightly in response to growing concerns over
tighter U.S. monetary policy. 
    The peso shed about 0.8%, touching a one-week low to
the dollar after S&P Global Ratings lowered Colombia's rating to
junk bond status.
    Analysts said the downgrade had come earlier than
anticipated, while Wall Street banks JPMorgan, Morgan Stanley
and Goldman Sachs predicted that Fitch would follow suit with a
rating downgrade this year. 
    The downgrade follows violent anti-government protests over
a now-withdrawn tax reform, as well as growing concerns over
strained fiscal spending and debt because of the COVID-19
    "We do expect Fitch to follow S&P in the near future given
our expectation that political restrictions will prevent the
authorities from delivering a meaningful structural tax reform,"
Goldman Sachs analysts wrote in a note. 
    "Furthermore, rising social activism may have negative
implications for medium-term investment/growth and the fiscal
baseline, given intense demands for additional spending." 
    Colombian stocks tumbled more than 2%.
    Other Latin American currencies rose slightly, recovering
from losses on Wednesday, after minutes of the U.S. Federal
Reserve's latest meeting showed more talk of tapering the bank's
bond purchase program than initially expected. 
    Brazil's real rose 0.4%, recovering from its
worst day in more than a week. The prospect of tighter monetary
policy in the country has benefited the real, as inflation heats
up in the country. 
    Mexico's peso rose 0.2%, although further gains were
hampered by a drop in oil prices. Still, the Mexican economy is
expected to benefit from a post-COVID recovery in the United
    Investors have also been watching for potential interest
rate hikes by the Mexican central bank, given a recent spike in
    Chile's peso rose 0.1%, while Chilean stocks
 outpaced their regional peers with a 1% bounce. The
bourse was supported chiefly by gains in mining stocks, after
SQM, the world's No. 2 producer of lithium, posted a
near three-fold jump in its sales of the metal in the first
    SQM's shares surged about 3.7%.
    Broader Latam stocks edged lower, with the MSCI's index of
regional stocks falling 0.3%.
    Shares of Brazilian state power utility Eletrobras
 fell 2.2% from record highs, as the country's lower
house approved a bill to privatize the firm.
    Key Latin American stock indexes and currencies:
                              Latest      Daily % change
 MSCI Emerging Markets         1328.96                 0.11
 MSCI LatAm                    2472.35                -0.28
 Brazil Bovespa              122493.27                -0.12
 Mexico IPC                   49333.20                 -0.1
 Chile IPSA                    4069.74                 0.98
 Argentina MerVal                    -                    -
 Colombia COLCAP               1237.13                -2.25 Currencies             Latest      Daily % change
 Brazil real                    5.2935                 0.42
 Mexico peso                   19.8692                 0.24
 Chile peso                      713.7                 0.06
 Colombia peso                 3713.75                -0.82
 Peru sol                         3.74                 0.00
 Argentina peso                94.2400                -0.03

 (Reporting by Ambar Warrick in Bengaluru; editing by Barbara