FINANCE-LATAM: Stock Exchanges Recovering, but Far From Euphoric

By Estrella Gutiérrez Reprint | | Print |

Estrella Gutierrez

CARACAS, Apr 6 1998 (IPS) - The seven leading stock exchanges of Latin America picked up strongly in March, when dealers handled 17.161 billion dollars-worth of business, good, but still a far cry from the euphoric 1997 levels.

In February, the stock markets of Brazil, Mexico, Chile, Argentina, Peru, Venezuela and Colombia moved 12.001 billion dollars, according to the Venezuelan Softline consultancy which monitors the regional stock exchanges.

But the stock exchanges have still not recovered last year’s record levels of last year, peaking at 28.004 billion dollars in July, a level analysts do not expect will be equallye in 1998.

“The present year will see the settling of emerging Latin American markets, but the lack of confidence created by the Asian crisis has already been overcome in the region,” Softline head, Jose Grasso told IPS.

The idea that emerging markets, even if risky, are more profitable than the stock exchanges of the industrial North has been weakened in recent months, with reports quoting measurements of lower yield.

Britain’s Financial Times stated in late March that the operators had become wary of the myth of greater profits in the new markets, considering the mature markets are offering attractive risk-free profits at present.

Grasso divided the immediate causes of the average 43 percent pick-up in the Latin American stock exchanges in March into international and regional factors.

The former included the “knock on effect” due to the excellent behaviour of the bourses of the European Union and United States, proving the Asian crisis, which lasted far longer than was initially expected, has been overcome.

“Globalisation meant the positive change seen in the big bourses of the world has spread to Sao Paulo and the other exchanges of the region,” said Grasso, professor in the Banking department of the main private university in Venezuela.

As for the regional causes, the expert said the operators were seeking refuge in the industrial markets as the Asian crisis became more serious and widespread, due to the fear of a destabilising wave in the economies of the developing South.

But nine months after the outbreak of the Asian crisis, the Latin American economies have demonstrated their ability to respond, reaching a new situation of stability which makes them, at least for the moment, more attractive than the other emerging markets.

“The Latin Americans showed now have the capacity to handle the effects of foreign crises like that of Asia,” said Grasso.

This element is added to by share values which fell to levels “making them very attractive purchases,” he said.

Another positive point is the contribution of the pension funds established in various countries of the region over the last 10 years, in a process led by Chile, but which spread to Mexico, Peru and Argentina, and is soon to arrive in Brazil.

“The pension funds of the region act with increasing weight on all the stock exchanges and will be an ingredient of increasing depth and stability on the markets,” said Grasso.

The Brazilian bourse in Sao Paulo continues to hold 70 percent of the activity of the seven most important stock exchanges in the region. In March, it handled 12.013 billion dollars, 25.44 percent more than in February.

The shares most dealt with in in Sao Paulo were those of the Brazilian telecom company, Telebras, at nearly 6.127 billion dollars, nearly double the total operations of the second regional market, in Mexico City, where 3.804 billion dollars changed hands, 27.87 percent up on February.

In Chile, the volume of business in the main centre was 489 million dollars (24.68 percent more than February), with 364 million in Argentina (11.98 percent growth) and 210 million in Venezuela (20.01 percent above February levels).

The seventh bourse, that of Colombia, handled 44 million dollars and was the only one to register a drop in relation to February, down 28.77 percent.

Apart from in Colombia, where the Bavaria brewery is the most desirable share, and in Argentina, where the lead position is traditionally held by the Acindar steel company, the dominant stock is either from telecom or energy concerns.

At the end of the first quarter, the seven leading markets had a total volume of 48.255 billion dollars of transactions, compared with the 44.243 billion in the same period of 1977, the 33.714 of 1996 and the 25.66 billion of 1995, according to Softline.

The total of 1997 deals reached 232.759 billion dollars, 90 billion up on 1996, with 142.215 billion. In 1995, the final total was 103.672 billion dollars.