January 21, 2019 / 10:01 PM / a month ago

EMERGING MARKETS-Most Latin American shares slump on risk aversion

 (Recasts throughout, updates prices)
    By Susan Mathew
    Jan 21 (Reuters) - Latin American stocks saw their steepest
one-day loss in nearly one month on Monday and currencies also
weakened as negative local news added to the risk aversion from
China data confirming global economic slowdown.
    The MSCI index of Latin American shares
slumped 0.8 percent and posted its worst day since Dec. 26 in
subdued trade as U.S. markets were closed for the Martin Luther
King Jr. holiday.
    Risk sentiment was hurt after data showed the Chinese
economy grew 6.4 percent in the fourth quarter from a year
earlier, matching levels last seen in early 2009 during the
global financial crisis. The number, however, was in line with
forecasts.
    Brazilian shares came off record highs of last
session and closed slightly lower after trading down for most of
the session, falling as much as 1.3 percent at one point. 
    The focus will be on the unveiling of the government's
economic reforms, particularly pension reforms, by President
Jair Bolsonaro's team at the World Economic Forum at Davos this
week.
    "If delivered, a reformist and liberal agenda should unlock
value of assets in Brazil, with positive revision of profits,
lower perception of risk and greater allocation to shares in
Brazil," analysts at XP Investimentos said in a note.
    Optimism was kept in check by an investigation involving
cash transfers into the account of Bolsonaro's son. Vice
President Hamilton Mourao attempted to distance the government
from the issue, saying, "Flavio Bolsonaro has nothing to do with
our government."
    "As much as the government tries and wants to separate the
Flávio Bolsonaro effect from the government, it is difficult,"
said Ricardo Gomes da Silva Filho, an exchange trader at
Correparti Corretora. "The market does not work with this
exemption as the government would like.
    "The reality is he is the president's son," he said. 
    Meanwhile, Mexican shares and the peso
weakened 0.5 percent, both underperforming their regional peers.
    The Mexican government's crack down on fuel theft took a
tragic turn after a gasoline pipeline explosion killed at least
89 people as they rushed to collect free fuel from the leaking
pipe amid fuel shortages caused by measures taken under the
anti-theft policy. 
    Allegations that the new government knew a pipeline was
leaking but did not act for hours were perceived as the latest
in a series of missteps by the government that have rattled
markets and led to analysts turning bearish on the country's
currency.
   Elsewhere in the region, Chile stocks and the
currency declined as prices of the country's main export,
copper, fell.
    Bucking the gloom, shares in Argentina rose to their
highest since February last year, while Colombian shares
climbed 0.2 percent. Their respective currencies, however,
weakened against a steady dollar.
    
    Key Latin American stock indexes and currencies at 2139 GMT:
 
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1018.45      0.05
                                        
 MSCI LatAm                    2846.84     -0.76
                                        
 Brazil Bovespa               96009.77     -0.09
                                        
 Mexico IPC                   44028.96     -0.48
                                        
 Chile IPSA                    5457.80     -0.39
                                        
 Argentina MerVal             35303.25      0.58
                                        
 Colombia IGBC                11674.29      0.23
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.7538      0.11
                                        
 Mexico peso                   19.1590     -0.43
                                        
 Chile peso                      672.1     -0.34
                                        
 Colombia peso                 3124.25     -0.08
 Peru sol                        3.327     -0.24
                                        
 Argentina peso                37.6200     -0.11
 (interbank)                            
                                        
 

 (Reporting by Susan Mathew in Bengaluru and Laís Martins in Sao
Paulo;
Editing by Bill Trott)
  
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