By Carla Mozee
Major Latin American equity markets jumped Wednesday, fueled by
the prospect that China's expanded economic-stimulus plans will
result in higher demand for resources from the region.
Regional equities surged as part of a global rally on word that
Chinese Premier Wen Jiabao is considering the launch of more
economic-stimulus measures, which would add to China's $585 billion
spending plan announced in November.
China is the largest consumer for many industrial
commodities.
"It's good news for market participants that the government of
one of the three world [economic] locomotives is still alive and
trying to drive," said Alfredo Coutino, senior Latin American
economist at Moody's Economy.com.
Brazil's Bovespa surged 5.3% to 38,402.24, pulling the index out
of negative territory on a year-to-date basis, where it was pushed
earlier this week for the second time in 2009.
Stock in Companhia Vale do Rio Doce (RIO), the largest supplier
of iron ore for steel, surged 10%, leading advancers among other
steel producers. Companhia Siderurgica Nacional (SID) climbed 9.1%,
Usinas Siderurgicas de Minas Gerais leaped 8.1%, and Gerdau (GGB)
rose 6.6%.
Shares of market heavyweight and oil giant Petroleo Brasileiro
(PBR) soared 6.3%, as crude for April delivery leaped 9% to $45.38
a barrel following a surprise decline in U.S. crude inventories as
well as the development from China, which is the world's
second-largest oil producer.
Argentina's Merval rose 5.9% to 977.32, led by a 6.6% jump in
shares of Tenaris (TS), which makes steel tubes used by the oil
industry.
Chile's IPSA rose 1.4% to 2,435.74, and Mexico's IPC gained 4.3%
to 17,824.96.
Copper miner Grupo Mexico was the session's best price performer
with its gain of 13%. Also higher was steel firm Grupo Simec (SIM),
with a rise of 7.6% and cement provider Cemex (CX), up 4.8%.
Coutino said some companies in Mexico may benefit from China's
move. Nevertheless Mexico's economy will need to see strong
economic improvement in the United States, which is the largest
buyer of its goods.
The U.S. Federal Reserve on Wednesday said its Beige Book report
of economic conditions showed that downward pressure on the economy
continued through the last week of February, and that business
leaders do not expect recovery until late in 2009.
Still, the bulls were out in force on Wall Street, with all of
the U.S. equity benchmarks up more than 2%. The S&P 500 Index
ended up 2.4% to 712.87.
"What China needs to do is plug the hole [in its economy] for a
period of time until the global economy starts growing," said Rob
Lutts, chief investment officer at Cabot Money Management. The
government appears "to be saying it's willing to step up and spend
quite a bit on infrastructure, housing, rural reform and
environmental" areas.
"Is this the beginning of more healthy growth? That's a question
that we really can't answer yet," added Lutts.
In exchange-traded funds, the iShares S&P Latin America 40
Index Fund (ILF) rose 6.9%, and the iShares MSCI Brazil Index Fund
(EWZ) rose 7.1%.
The market's advance may be halted by Friday, according to
Coutino, after the release of the U.S. employment report, which is
expected to show another month of big job losses.
In other market moves, Brazil's Banco Bradesco (BBD) shares
moved up 5.2% following a ratings upgrade to buy from neutral by
UBS Pactual, which said Unibanco should trade at a premium to its
global peers because of "the better quality of its equity and
resilient earnings."
UBS Pactual also said Bradesco and Banco Itau (ITU) are
attractive after a recent sell-off, which it attributed to weakness
in U.S. and European banking stocks.
"Although we believe that there is a positive correlation in
financials globally, we think that the sell-off in Brazil is
overdone," wrote UBS analysts Juan Partida and Eduardo Nishio in a
note.
The broker added that the newly merged Itau Unibanco continues
to be its top regional pick, and expects "signs of synergies" by
year's end. Shares of Itau climbed 6% and Unibanco (UBB) rose 5.8%.
The combined company's shares will begin trading on March 31.