Chile's IPSA Has Biggest Weekly Drop in 3 Years: Latin Stocks

Chilean stocks fell, their biggest weekly decline in more than three years, after lawmakers proposed speeding up a plan to ease restrictions on the amount pension funds can invest abroad.

``People think that if you open the door and you let pension funds take more money outside that the market will go down because they'll buy foreign assets and sell Chilean assets,'' said Matthew Hickman, who manages $5 billion in emerging market funds at Credit Suisse in New York. ``There's quite a bit of retail money in the Chilean market that reacts to headlines.''

The benchmark IPSA index of 40 stocks fell 50.50, or 1.7 percent, to 2919.84. The 6 percent decline for the week is the biggest since Nov. 7, 2003. Brazilian and Mexican stocks also fell today.

Before this week's slump, the Chilean index jumped 15 percent this year, almost triple the 5.5 percent gain of the Morgan Stanley Capital International index of Latin American stocks. Retailer Cencosud SA led the loss this week, declining 9.8 percent and reducing its gain for the year to 9.4 percent.

The companies whose stock prices have gone up faster than earnings will be the first companies investors sell, said Cristian Gardeweg, an economist at Celfin Capital SA in Santiago.

La Polar SA, a clothing and electronics retailer, fell 11 percent this week, cutting its yearly gain to 17 percent. S.A.C.I. Falabella SA, a department store chain, fell 14 percent this week, lowering its gain for the year to 20 percent.

Pension funds, which take in about $300 million a month, were the ``main driver'' of this year's gains, because the limits force them to put much of that money into the local market, UBS strategists Ben Laidler and Brian Chase wrote. Chilean lawmakers' proposal to lift limits on pension investment could ``deflate'' a ``mini-bubble'' that has developed in the stock market, they said.

`Overweight'

Thierry Wizman, emerging market strategist at Bear Stearns & Co., reiterated his ``overweight'' rating on Chilean equity, saying that other proposals to loosen investment regulations will lure more investors to stocks and mutual funds.

``Pension reform in Chile is not a cause for panic,'' he wrote in a report today.

In Brazil, stocks gained for a second week as investors bet on continued demand for the country's exports as the global economy grows.

The Bovespa Index of the most-traded stocks on the Sao Paulo exchange gained 0.4 percent to 46,015.79 this week. The index today fell 436.79, or 0.9 percent, after rising to records for the past two days.

The release of Federal Reserve minutes on Feb. 21, in which officials said inflation was still a ``predominant concern,'' reinforced speculation that the economy in the U.S. -- Brazil's main trading partner -- will grow too much, rather than too little, said Kelly Trentin, investment analyst at SLW Corretora de Valores.

U.S. Growth

``Economic growth stopped being such a relevant worry,'' Trentin said. The U.S. economy ``isn't as weak as was feared.''

The week's gain was led by state-controlled oil company Petroleo Brasileiro SA, as crude oil rose to a high for this year earlier today on lower supplies and increased demand.

An Energy Department report yesterday said U.S. stockpiles fell as refineries operated at lower capacities. Demand increased, with average gasoline consumption over the past four weeks 3.6 percent higher than the same period a year ago, the report said.

Mexican stocks fell today after the central bank stiffened a warning that it may raise interest rates for the first time since May 2005 to stem inflation. Central bankers are worried that a surge in corn prices that boosted the cost of tortillas, a Mexican staple, by 16 percent in the past 12 months may spread to other prices in the economy.

Rate Concern

The Bolsa index dropped 170.76, or 0.6 percent, to 28,505.72, for a 0.1 percent weekly decline.

Higher interest rates in Mexico would hurt economic growth, reduce corporate earnings and may prompt investors to sell equities and buy bonds, said Gerardo Roman, head trader at Actinver SA in Mexico City.

``Banco de Mexico is suggesting it may raise rates possibly as early as March,'' Roman said in a telephone interview. ``That triggered some profit-taking.''

Elsewhere in the region, the benchmark stock index in Colombia fell, shares in Peru and Venezuela rose, and Argentina's Merval index was little changed. The Morgan Stanley Capital International index of Latin American shares fell 1.4 percent to 3152.57, heading for a 0.3 percent weekly decline.

The following are the most-active stocks in Latin American markets today. In Brazil, the preferred share is usually a company's most-traded class of stock.

Brazil

Gol Linhas Aereas Inteligentes SA (GOLL4 BS), Brazil's biggest airline by market value, fell 1.52 reais, or 2.3 percent, to 63.78 reais. UBS Pactual analyst Rodrigo Goes cut his 2007 earnings estimate for Gol by 6 percent, to 695 million reais, on the expectation that airline capacity will grow at roughly twice the rate of demand this year, eroding the company's margins.

Petroleo Brasileiro (PETR4 BS), or Petrobras, rose 38 centavos, or 0.8 percent, to 45.43 reais. Bear Stearns & Co. reiterated its ``outperform'' rating on Petrobras's American depositary receipts. The company is likely to increase oil production 10 percent in 2007, with higher output starting in the second quarter as five platforms ramp up output, analyst Marc McCarthy wrote in an e-mailed report.

Usinas Siderurgicas de Minas Gerais SA (USIM5 BS) fell 1.90 reais, or 2 percent, to 92.69 reais. Brazil's steel companies have been trading close to target prices after gaining more than 20 percent since the beginning of the year, Brascan Corretora analyst Rodrigo Ferraz said in a phone interview. Usiminas, as Brazil's third-largest steelmaker by sales is known, has fallen 5.5 percent this week after gaining 22 percent between the end of 2006 and Feb. 16.

Gerdau SA (GGBR4 BS) fell 65 centavos, or 1.7 percent, to 38.35 reais. Latin America's largest steelmaker gained 11 percent between the beginning of the year and Feb. 16. Cia. Siderurgica Nacional (CSNA3 BS), Brazil's fourth-largest steelmaker, fell 1.69 reais, or 2.1 percent, to 77.75 reais after gaining 24 percent.

Mexico

Cemex SAB (CEMEXCP MM) fell 80 centavos, or 1.9 percent, to 40.40 pesos. The shares fell a second day, after gaining 3.3 percent the first three days of the week.

Coca-Cola Femsa SA (KOFL MM), Mexico's largest Coca-Cola bottler, fell 1.03 pesos, or 2.4 percent to 42.47 pesos. Fourth- quarter net income rose 1.3 percent to 1.51 million pesos, according to a company statement distributed on Business Wire.

Consorcio ARA SA (ARA* MM), Mexico's fourth-largest homebuilder, fell 3.78, or 4.7 percent, to 76.21 pesos. Merrill Lynch analysts Carlos Peyrelongue and Esteban Polidura downgraded ARA to ``neutral'' from ``buy,'' citing a 42 percent increase in the price of shares since October in an e-mailed report.

Mexichem SA (MEXCHEM* MM), the Mexican chemical company, rose 2.40 pesos, or 10.6 percent, to 25 pesos. The company's announcement yesterday it plans to buy companies in Colombia and Brazil will increase cash flow by 67 percent and reduce its vulnerability to volatile plastic resin prices, analyst Raquel Moscoso of IXE Grupo Financiero said in a research note e-mailed today. Moscoso raised her recommendation on the shares to ``buy'' from ``hold,'' according to the report.

Grupo Mexico SAB (GMEXICOB MM), Mexico's largest copper miner, rose 58 centavos, or 1.1 percent, to 52.27 pesos. Copper for May delivery rose 2.7 percent on the Comex division of the New York Mercantile Exchange.

source:www.bloomberg.com