EMERGING MARKETS – Slowing growth worries Latam assets, Mexican peso collapses 1%

* Brazilian bank considered more than 100bp -minute hike * Mexican cenbank rose 25bp on Thursday * Chilean peso hits yearlong low (add details, update prices all by Susan Mathew and Shreyashi Sanyal Sept. 28 (Reuters) – Latin American stocks on Thursday joined a massive sell-off in markets, driven by uncertainty surrounding economic growth, as soaring US Treasury yields weighed on currencies, pushing the Mexican peso and the Brazilian real down by more than 1% each. Disappointing profit growth for Chinese industrial companies amid an electricity shortage, latest data spooked markets amid evidence of slowing growth in the world’s second-largest economy, a major destination for commodity exports of Latam rich in resources. Latam’s MSCI stock index fell 3.4%, while its currency counterpart hit a one-month low. The Brazilian real hit an almost six-week low, last trading 1% at 5.4311 to the dollar. Minutes from the central bank’s policy meeting last week showed it plans to raise the Selic key rate by more than 100 basis points. Policymakers are planning further hikes of this size to bring rates to “dramatically restrictive” levels to meet their 2022 inflation target, the minutes show. After starting the year at a record 2.00%, the fight against inflation – now above 10% – saw the benchmark rate rise to 6.25%. “We see the USD / BRL around 5.33 at the end of the year, but the risks increase towards a weaker currency,” Citi Research strategists said. They see the Selic rate ending the year at 8.25% and peaking at 9.0% in February 2022. In Mexico, the central bank would increase the benchmark interest rate for the third time in a row by 25 basis points to 4.75% Thursday as inflation remains above target. TD Securities Chief EM Strategy Sacha Tihanyi expects the bank to continue to look hawkish. “The MXN carry helped it bounce back from bouts of weakness in 2021. However, rising US yields will give Banxico an additional boost to ensure short-term MXN yields remain competitive, to minimize the potential. MXN instability. ” On Tuesday, the Mexican peso collapsed nearly 1.2% to hit its lowest level in a month. Chile, the world’s largest copper producer, saw its currency drop to its lowest level in nearly a year as red metal prices fell. The Chilean House of Representatives was due to vote on Tuesday on the fourth withdrawal of pension funds. The Chilean economy is expected to grow faster than expected – by 9.5% in 2021 against a previous estimate of 7.5%, Finance Minister Rodrigo Cerda said on Monday. The government of Santiago also lifted the state of emergency, put in place due to the pandemic, after successful vaccination campaigns. Main Latin American stock indices and currencies at 6:48 p.m. GMT: Stock market indices Last daily change in% MSCI Emerging Markets 1,260.18 -0.57 MSCI LatAm 2,228.24 -3.4 Brazil Bovespa 110,279.45 -2.91 Mexico CPI 51,054.78 -1.05 Chile IPSA 4,322.97 -0.66 Argentina MerVal 75,403.25 -0.376 Colombia COLCAP 1,352.12 0.5 Currency Last daily change in% Brazilian real 5.4311 -0.97 Mexican peso 20.3490 -1.26 Chilean peso 800.9 -1.00 Colombian peso 3831.53 0.24 Peruvian sol 4.1243 -0.28 Argentine peso (interbank) 98.6600 -0.02 Argentine peso (parallel) 184 1.36 (Report by Susan Mathew and Shreyashi Sanyal in Bengaluru, edited by Mark Heinrich)

Comments are closed.