September 3, 2019 / 2:58 PM / 5 months ago

EMERGING MARKETS-Argentine peso rises on capital controls; trade woes impede Latam stocks

    By Agamoni Ghosh
    Sept 3 (Reuters) - Argentina's peso gained for a second day
on Tuesday following capital controls amid a deepening financial
crisis, while ongoing U.S.-China trade tensions dented Latin
American stocks. 
    The peso opened sharply stronger, up 6% officially
against the dollar, marking Wall Street's first reaction to
Argentina's new currency controls after a long holiday weekend
in the United States.   
    A divergence between the official and black market rates of
the currency still remained for a second day, casting doubts on
how long the recovery in the peso could be sustained through
such controls.   
    "The black market rate is lower then the official suggesting
that there is still some pressures there," said Edward Glossop,
Latam economist at Capital Economics.  
    "History suggests that capital controls do sometimes help to
alleviate pressure on currencies in the near term, but over the
longer term when people start finding loopholes in the system. 
That's when it makes it more difficult." 
    The controls come after markets reacted sharply to rating
downgrades by Standard and Poor, Fitch and Moody's, after the
government announced its plans to "re-profile" some $100 billion
in debt.
    MSCI's index of Latin American stocks was
0.2% lower, in-line with global equities as investors fret about
Washington and China's struggle to schedule a meeting this month
to renew trade talks.
    The Merval stock index in Buenos Aires shed
3.7%after having closed 6% higher in the previous session. 
    Stocks in Chile declined 0.7%, while the peso
 fell to its lowest since January 2016 ahead of a decision
by the central bank's on monetary policy.  
    "We think that the central bank will lower the monetary
policy rate by 50bps, to 2.00%, in today's monetary policy,"
said analysts from Credit Suisse in a note. 

 Key Latin American stock indexes and currencies at 1430 GMT
 Stock indexes                                  daily %
                          Latest                 change
 MSCI Emerging Markets             974.38         -0.95
 MSCI LatAm                       2555.53          -0.5
 Brazil Bovespa                 100146.86         -0.48
 Mexico IPC                      41979.19         -0.31
 Chile IPSA                       4739.13         -0.69
 Argentina MerVal                24963.67        -4.702
 Colombia IGBC                   12534.16         -0.81
 Currencies                                     daily %
                                   Latest        change
 Brazil real                       4.1599          0.52
 Mexico peso                      20.0375          0.51
 Chile peso                         726.2         -0.19
 Colombia peso                    3439.73          0.06
 Peru sol                           3.404          0.03
 Argentina peso                   55.8000          5.73

 (Reporting by Agamoni Ghosh amd Medha Singh in Bengaluru)
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