LATIN AMERICA-FINANCE: Leading Markets Fell in New York’s Wake

By Estrella Gutiérrez Reprint | | Print |

Estrella Gutierrez

CARACAS, Apr 3 1997 (IPS) - Latin America’s leading stock exchanges suffered a drop in March with respect to February, dragged down by the New York stockmarket, according to a report released here Thursday.

In March, a total of 13.57 billion dollars was traded in the region’s seven leading emerging stock exchanges, down from February’s 15.01 billion.

The drop originated in tumbles in the two largest markets, Brazil and Mexico. The Sao Paulo exchange – Ibovespa index – fell 6.42 percent, making the total traded in March 9.43 billion, while the Mexican stockmarket – IPandC index – fell 25.62 percent, leaving the total traded at 2.53 billion.

Argentina – Merval index – Latin America’s fourth leading market, plunged 31.62 percent with respect to February, with a total of 444 million traded in March.

Peru – IGBVL index – also dropped 14.36 percent, leaving a total traded of 250 million dollars.

Chile – IGPA index – the region’s third market, bounced back after a 15.6 percent decline in February with respect to January, with a slight 1.93 percent rise in March, and a total of 593 million traded.

The two least developed of the region’s seven largest markets, Venezuela – ICB index – and Colombia – IBB index – also grew in March, 4.91 and 13.34 percent, respectively. A total of 166 million was traded in Caracas, and 54 million in Bogota.

Juan Andres Rodriguez, director of Softline Consultants, which puts out a monthly electronic report on the performance of regional stock markets, told IPS that a drop in dollars on the leading regional exchanges is triggered by what occurs in New York.

He explained that many bonds were traded in countries such as Brazil, Mexico and Argentina as well as on the international market – in even greater volumes in Argentina’s case, for example – a phenomenon that creates a domino effect with the drop in the market index that hits them hardest, that of New York.

Rodriguez said the fall was connected to expectations of a rise in U.S. interest rates, which finally took place on Mar. 25 – a .25 percent increase – to which a similar increment could be added this month.

In compensation, he said, those countries saw the yields of their debt bonds grow, because a rise in fixed interest rates pulls all such instruments in the same direction.

A side effect of the phenomenon is that the price of the debt bonds falls, said Rodriguez, while variable yield instruments tend to end up less attractive, shares in particular.

As usual, the telecoms and energy sectors led the trading. Only in Argentina was a steelworks, Acindar, at the forefront.

In Brazil, the telecoms firm Telebras alone traded more than double Mexico’s total, 5.53 billion, 70.5 percent of the total moved in that market.

In Mexico another telecoms company, Telmex, ranked highest with 489 million, while the electric firm Endesa led the way in Chile with 87 million, Electricity of Caracas in Venezuela (70 million), Telefonos del Peru (52 million) and Promigas in Colombia (seven million).