By Carla Mozee
Mexican stocks edged lower Tuesday, but sharp selling pressure
from swine-flu worries subsided as investors rooted around for
shares battered in the previous session.
Mexico's IPC equity index fell 0.8% to 21,662.53. On Monday, the
index slid 3.3%, its biggest loss in nearly a month.
Monday's drop in the market "was more subdued than might have
been feared" after the IPC's run-up since hitting lows in early
March, said Citigroup Latin American equity strategist Geoffrey
Dennis in a note to clients on Tuesday.
"Therefore, it seems that investors, far from panicking, have
used these tragic circumstances to lighten positions," he
wrote.
The death toll from the swine flu has now reached 152 in Mexico.
Also, the World Health Organization raised its alert level on the
disease and said containment of the outbreak wasn't feasible.
Economists said a severe swine flu outbreak would amplify the
effects of the global economic downturn.
Air carriers, which suffered the steepest falls on Monday,
regained some lost ground. Grupo Aeroportuario del Centro Norte
(OMAB) rose 5.2% as the company reported better-than-expected
first-quarter earnings of 38 pesos a share (21 cents). Its shares
dropped 13% on Monday.
Grupo Aeroportuario del Pacifico (PAC) shares advanced 3.4%
after Monday's 11% stumble.
Mexico's currency rose 0.9% to 13,835 pesos per U.S. dollar. The
currency sold off more than 4% in Monday's session.
The iShares MSCI Mexico Index Fund (EWW) slipped 0.3% following
Monday's tumble of 7.2%.
Citigroup said it remains underweight in Mexican equities and
that it believes it's "too early" to buy the market back.
"As Mexicans and potential travelers stay home to avoid
contagion, the most obvious impact will be on tourism, restaurants,
entertainment and retail," said Dennis. "Exporters may benefit from
a lower peso assuming factories continue to operate."
Shares of retailer Wal-Mart de Mexico (WMMVY) rose 1.8%, brewer
Grupo Modelo advanced 3% and discount retailer Comerci gained
3.4%.
But telecom and manufacturing stocks still struggled, with
conglomerate Grupo Carso down 3.7%, America Movil (AMX) down 1.4%
ahead of its results, and steel producer Grupo Simec (SIM) off
2.6%.
Brazil slips
In Sao Paulo, a paring of losses among steel stocks and a
turnaround in shares of Petrobras (PBR) for a 0.5% rise helped pull
the Bovespa out of negative territory. It equity index ended up 2
points at 45,821.44. It dropped 2% on Monday.
Shares of Companhia Vale do Rio Doce (RIO) gave up 0.7% after
the company said first-quarter iron ore output fell 37% to 46.86
million metric tons from the same-period a year-ago as it faces
"unprecedented weak demand conditions derived from the sharp
decrease of global industrial production."
On a quarter-over-quarter basis, production fell 25.9%.
Vale said in a statement that production is being managed "in
line with its assessment of market conditions prevailing in the
short-term."
Shares of steel maker Gerdau (GGB) fell 1.1%, Usiminas declined
1.6% and CSN (SID) shed 0.1%.
Investors in the steel market also assessed as report from
United States Steel (X) late Monday reported a bigger-than-expected
quarterly loss and slashed its dividend by more than 80%.
Shares of meat producers were mixed. JBS, whose shares slid 12%
a day ago, rose 2.1%. Sadia (SDA) shares fell 3.4% after Monday's
climb of 7.8%. Rival meatpacker Perdigão (PDA) gained 2.1%.
Banking stocks were higher ahead of the Brazilian central bank's
decision on interest rates Wednesday. Market players currently
expect policymakers to cut the benchmark rate by at least 100 basis
points from the current rate of 11.25%. Such a move would leave the
rate at its lowest level since the Selic was established in
1996.
Itau Unibanco (ITU) rose 2.2%, Bradesco (BBD) gained 1.1% and
Bando do Brasil rose 1.3%.
Chile's IPSA ended 0.4% at 2,671.62 and Argentina's Merval rose
0.1% at 1,218.65.