Chilean Stocks Drop, Led by Retailers: World's Biggest Mover

Chile's IPSA had the biggest drop of the world's main equity indexes on speculation that the congress may spur selling of local stocks by speeding up a plan to ease restrictions on the amount Chilean pension funds can invest abroad.

``Foreign investment limits may be raised sooner than expected,'' UBS analyst Brian Chase wrote in a report today. ``This could deflate the `mini-bubble' that has been developing in Chilean equities.''

The benchmark index of 40 stocks fell 85.92, or 3 percent, to 2,925.51, the biggest drop among 83 indexes tracked by Bloomberg. For a second straight day, Chile's decline was the largest move among markets included in global benchmarks. Indexes in Mexico and Brazil rose, both setting records.

Chilean shares fell as a majority in the Senate Finance Committee called for the early lifting of limits that prevent the country's pension funds, with $89 billion of assets, from investing more than 30 percent abroad, Chase wrote. The IPSA has retreated from a record 3,107.4 on Feb. 16, when it had gained almost 16 percent this year.

``When you see that the market had gone up 15 percent in a month and a half, it's a bit much'' said Raimundo Valdes, an analyst in Santiago at Santander Investment Research, Inc. ``We expected that much increase for the year.''

Retailers led today's decline on concern increasing competition for consumers' disposable income threatens to trim profit margins on the new projects, said Antonio Valenzuela, an analyst at Penta Estrategia e Inversiones in Santiago. Retailers stocks had surged this year on optimism that earnings will jump, he said.

Retail Competition

Chilean retailers are building new malls, department stores and supermarkets, increasing competition for consumers' disposable income and trimming profit margins on the new projects, said Antonio Valenzuela, an analyst at Penta Estrategia e Inversiones in Santiago. Retailers stocks had surged this year on optimism that earnings will jump, he said.

``It's difficult for new projects to be as profitable as in the past,'' Valenzuela said by phone. ``The prices being paid are exaggerated,'' he said of retail stocks.

Cencosud SA, the nation's largest retailer, dropped 86.40 pesos, or 4.5 percent, to 1840 pesos, declining for a fourth session. The stock has gained 11 percent this year. S.A.C.I. Falabella fell 120 pesos, or 4.9 percent, to 2340 pesos. Cencosud and Falabella trade at more than 30 times estimated earnings this year, Valenzuela said.

Ripley Corp SA, a department store chain owner, fell 27.10 pesos, or 3.5 percent, to 758 pesos, declining for a third session. The stock pared its gain for the year to 19 percent.

Bovespa Gains

In Brazil, The Bovespa Index of the most-traded stocks on the Sao Paulo exchange rose 241.21, or 0.5 percent, to 46,090.24, led by miner Cia. Vale do Rio Doce.

The price of metals such as nickel is ``stable, but at a very elevated level,'' said Cristiane Viana, a steel and mining analyst with Agora CVTM, Brazil's largest stock brokerage. This ``boosts the steel sector and ends up boosting Vale.''

Nickel fell 0.1 percent today after trading at a record $39,999 a metric ton yesterday. Nickel prices have more than doubled from a year ago, when the metal used in stainless steel was trading at $15,175 a metric ton.

Vale rose 1.33 pesos, or 2.1 percent, to 65.38 reais.

Vale shares also were helped by the company's plan to sell shares of its shipping container unit to trim debt from last year's acquisition of Canadian nickel miner Inco Ltd., Viana said.

Reversal

Mexican shares fell in the morning on a government report that U.S consumer prices excluding food and energy rose 0.3 percent in January, the most since June. The consumer price report fueled concerns that U.S. inflation remains a threat

The Bolsa index rebounded in the afternoon, gaining 126.30, or 0.4 percent, to 28,715.96.

``The Bolsa has been pretty strong'' said derivatives trader Hector Chavez Rios of Santander Investments in Mexico City. ``Commodities like oil and copper fall, but the index doesn't. The only thing that moves the market is bad economic news in the United States.''

Mexico sells about 80 percent of its exports in the U.S.

Chavez Rios said recent upgrades of shares by U.S.-based analysts have spurred buying of such companies as homebuilder Urbi Desarrollos Urbanos SA.

Urbi, Mexico's largest homebuilder, was raised by Merrill Lynch analyst to ``buy'' from ``hold'' today, sending shares surging almost 4 percent. Shares rose 1.57 pesos to 43.57 pesos. Urbi said in a statement yesterday revenue will rise from 20 to 22 percent this year from last year, more than an estimate in August of 14 to 16 percent.

In other Latin American markets, the main stock indexes in Peru and Venezuela rose, while Colombia's IGBC index fell. Argentina's Merval index was little changed.

The Morgan Stanley Capital International index of Latin American shares rose 0.3 percent to 3166.70.

The following are the most-active stocks in Latin American markets.

Brazil

Petroleo Brasileiro SA (PETR4 BS), the state controlled oil company, fell 3 centavos, or 0.1 percent, to 44.30 reais. Crude oil slid as much as 1.3 percent earlier today as warmer weather moved into the eastern U.S. and Europe, curbing consumption of heating fuel. Cruse oil rose 2.1 percent for the day, after fires and interrupted power supplies trimmed output at refineries in the U.S. and Canada pver the last two weeks.

Chile

Empresas Copec SA (COPEC CC), Chile's largest pulp exporter, fell 151.60 pesos, or 2 percent, to 7475 pesos. The shares had risen 12 percent this year through yesterday.

Mexico

Axtel SA (AXTELCPO MM), the Mexican fixed-line telephone company that bought Avantel SA last year, fell 1.04 pesos, or 2.4 percent, to 42.15 pesos. Shares gained 8.5 percent in the four sessions before today.

Industrias Bachoco SAB (BACHOCOB MM), Mexico's largest poultry producer, rose 1.61 pesos, or 6.1 percent, to 28 pesos. Bachoco will rent chicken farms, poultry packing and processing plants and distribution centers from Grupo Libra. Bachoco said in a statement sent via PRNewswire that it will also acquire Grupo Libra's working capital and brand names for an undisclosed price.

Grupo Mexico SAB (GMEXICOB MM), Mexico's largest copper miner, rose 1.02 pesos, or 2.1 percent, to 50.43 pesos. Copper for May delivery rose 2.6 percent yesterday on the Comex division of the New York Mercantile Exchange.

source:www.bloomberg.com