November 26, 2018 / 10:24 PM / 10 months ago

EMERGING MARKETS-Latam stocks, FX dip; Mexican shares close at 4-1/2 year low

 (Rewrites with closing prices, market details)
    By Susan Mathew
    Nov 26 (Reuters) - Latin American stocks and currencies
tumbled on Monday and Mexico's share index marked its lowest
close since March 2014 as U.S. President Donald Trump increased
pressure on its trading partner to stop migrants crossing into
the United States.
    A stronger dollar added to regional currency woes with the
Argentine peso leading losses, down 4.1 percent, touching
its lowest since early October.
    The MSCI index of Latin American shares
dropped to a two-month low shedding 2.5 percent. Its currency
counterpart posted it worst day since early
October, both underperforming broader emerging markets
 by a significant margin.
    "Its a variety of factors. In Argentina, data is really
weak, recession was deeper than expected, we also have strikes
and riots - bad optics ahead of the G20 summit," said Win Thin,
global head of emerging market currency strategy at Brown
Brothers Harriman.
    He said in Brazil there were reports of President-elect Jair
Bolsonaro "alienating some of the leaders in Congress, and that
suggests he may have trouble passing his reform agenda." 
    Tensions at the Mexico-U.S. border were a factor for Mexican
 markets, Thin said. They have already been battered in recent
weeks by the incoming government's perceived policy missteps and
 extended losses as Trump upped his rhetoric on Central American
migrants in a week when a reworked trade deal between Mexico,
U.S. and Canada is to be formally signed.

    Trump said Mexico should send the migrants back to their
home countries. On Sunday, U.S. authorities shut the busiest
border crossing and fired tear gas into a crowd there.

    The Mexican peso weakened more than 1 percent to a
more than five-month low. Mexico City's IPC stock index
dropped more than four percent for its lowest close in more than
4-1/2 years.
    Brazil's real slipped 2.9 percent and saw its worst
day in a year and half. Stocks lost 0.8 percent with
financials and consumer discretionary shares leading losses. 
    "House speaker Rodrigo Maia signals independence from the
Bolsonaro administration as he reaches out to the centrist
parties in his bid to seek re-election," Citigroup analysts said
in a note. "As Bolsonaro ... needs votes to pass the pension
reform, friction with congress is his key vulnerability." 
    While Citi analysts expect Bolsonaro, who takes office on
Jan. 1, to eventually come around, until then "he may suffer
more setbacks in congress, prompting the market to temper reform
optimism and the real to underperform peers."
    Brazilian markets had seen a sharp rally on optimism that
Bolsonaro would bring about much needed pension reforms to
reduce the budget deficit. The pension system is increasing
national debt and contributed to Brazil losing its
investment-grade credit rating in 2015.

    However, a 1.3 percent rise in Argentine stocks and
a near 1.2 percent climb in Colombian shares helped cap
the MSCI equity index decline. 
    The Argentine peso plummeted as data showing that economic
activity in the country gripped by recession shrunk 5.8 percent
in September. A strike called by pilots and other personnel that
led to cancellation of flights just days before Argentina hosts
a meeting of the G20 also dented investor sentiment.

    Latin American stock indexes and currencies at 2128 GMT:
 Stock indexes                Latest     daily %     YTD %
                                          change    change
 MSCI Emerging Markets          976.57      0.76     -15.7
 MSCI LatAm                    2494.80     -2.46    -11.79
 Brazil Bovespa               85546.51     -0.79     11.97
 Mexico IPC                   39416.22      -4.2    -20.14
 Chile IPSA                    5133.42     -0.14     -0.14
 Argentina MerVal             31131.87      1.33      3.55
 Colombia IGBC                12050.12      1.24      5.98
 Currencies                              daily %     YTD %
                                          change    change
 Brazil real                    3.9410     -0.65    -15.93
 Mexico peso                   20.6210     -1.07     -4.47
 Chile peso                      676.7     -0.18     -9.17
 Colombia peso                  3242.5     -0.52     -8.03
 Peru sol                         3.38     -0.06     -4.23
 Argentina peso                38.9000     -3.08    -52.19

 (Reporting by Susan Mathew in Bengaluru; editing by Grant
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