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Outlook for Brazilian Economy Remains Upbeat |
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Written by Paul Davee
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Tuesday, 25 October 2005 |
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Latin American markets were mixed to lower, as investors took some profits following yesterday's gains on reassuring political developments in Argentina and optimism about the Mexican and Brazilian economies.
However, an upbeat earnings report from Televisa helped to keep Mexican shares above water in today's session.
Brazil's Bovespa Index sank 336.96 points, or 1.13%. Mexico's benchmark Bolsa Index edged up 11.55 points, or 0.08%, while Argentina's Merval Index tumbled 40.72 points, or 2.84%.
Brazilian stocks retreated, as investors locked in some of yesterday's strong gains on optimism about the local economy. A survey released by the central bank yesterday showed that Brazil's inflation forecast for 2006 remained unchanged at 4.6%. The outlook for 2005 inflation edged up to 5.31% from 5.22%.
Meanwhile, the outlook for the economy and interest rates remained upbeat. The economy is seen growing 3.3% and 3.5% for this year and next, respectively, and interest rates are expected to end the periods at 18.0% and 16.5%. The Selic interest rate is currently at 19%.
Among individual shares, mining giant CVRD was active after CEO Roger Agnelli yesterday offered a positive outlook for the company. He said CVRD will break production records over the next several years and will be in a good position to negotiate higher iron ore prices when talks begin next month.
Elsewhere, Mexican shares edged up, helped by an upbeat earnings report from media giant Televisa. The company said its third-quarter net profit rose 8% to 1.66 billion pesos from a year earlier, thanks to gains in pay-television revenue. Sales rose in nearly all segments.
"We believe Televisa's core business (up 3.0% during the quarter) will continue to benefit from Mexico's political times, while the fast growth reported by Pay-TV (Sky, Cablevision, and programming sales) should continue to drive profitability," a brokerage said in a research note.
Meanwhile, airport operator Asur was in focus, as analysts expressed concerns about the impact of Hurricane Wilma on tourism flows in Mexico. Wilma hit Mexico's Caribbean coast yesterday. An influential investment bank downgraded the company's stock today to "neutral" from "buy," saying that Wilma may have done more damage to Cancun and tourism than Hurricane Gilbert in 1988.
Early today, Asur reported higher earnings and revenue for the third quarter, but noted that passenger traffic was hurt by Hurricane Emily, which hit the area in July but caused far less damage than Wilma.
Elsewhere, Argentine issues sank, as investors took some profits following yesterday's strong gains on indications that President Nestor Kirchner strengthened his power base in congress. In congressional elections over the weekend, First Lady Cristina Kirchner won a Senate seat representing the Buenos Aires province.
She received a wide margin over opponent Hilda Duhalde, the wife of former President Eduardo Duhalde. Under Argentina's complex voting system, Cristina Kirchner's senate victory pulls an affiliated "list" of candidates into the Lower House as well. As such, President Nestor Kirchner now has substantially more backing in Congress that should help him move forward with his agenda.
In other developments, a government official said today that Argentine Economy Minister Roberto Lavagna will retain his post despite an expected reshuffling of President Nestor Kirchner's Cabinet following this past weekend's midterm congressional elections.
"As far as I know, Minister Lavagna, whose performance is excellent, will continue his post and the President never thought of replacing him," Interior Minister Anibal Fernandez told cable news channel Todo Noticias.
Thomson Financial - www.thomsonfinancial.com
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