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EMERGING MARKETS-Latin America stocks fall on China worries
March 20, 2012 / 1:57 PM / 6 years ago

EMERGING MARKETS-Latin America stocks fall on China worries

* Brazilian stocks fall on concern over China slowdown

* Commodity shares lead declines; Vale sheds 2 pct

* Stock in Mexico, Chile fall; America Movil declines

By Guillermo Parra-Bernal

SAO PAULO, March 20 (Reuters) - Latin American stocks fell for the first day in four on Tuesday, led lower by mining shares, as signs that China’s demand for raw materials is losing steam sparked worries over the status of a global economic recovery.

Vale, the world’s biggest iron ore producer, led declines in Brazil after remarks by Australian rivals pointed to sliding ore demand in China. The benchmark Bovespa stock index posted its biggest intraday tumble in two weeks, with 65 out of its 70 stocks posting losses.

Foreign investors, who have fueled the index’s 20 percent gain this year, fled Brazilian markets to take refuge on assets seen as safer such as U.S. Treasuries, traders added. Local equity investors looked for the sidelines, reinforcing a tendency that has limited gains in the Bovespa since mid-2011.

“Markets in Brazil had been favorable this year but more recently local investors have grown even more worries about the disconnect between economic data and market sentiment,” said Daniel Garcia, head of retail equity trading at Corretora Souza Barros brokerage in São Paulo.

Global equity markets fell. Risk-taking, as measured by the VIX index fell, and the U.S. dollar rose - indicating a cautious mood among investors worldwide.

The MSCI Latin American stock index fell 1 percent to 4,164.17, the lowest level in a week. The index, which has gained 16 percent this year, is now trading above its 12-month average level partly because of a recovery in Brazilian equities.

BHP Billiton, the world’s biggest miner, foresees Chinese demand for iron ore, a key ingredient of steel, to slow to single-digit growth rates. The comments weighed on Brazilian equities, which are very sensitive to any hint of softening demand in China - the nation’s largest single trading partner.

In addition, housing starts in the United States slipped in February, helping fuel the steepest intraday drop in Brazilian stocks in more than a week. Uncertainty over the extent and strength of the recovery in the U.S. economy weighed on market sentiment in Brazil, traders said.

“The most affected will likely be basic materials stocks, which are turning more and more sensitive to news about China and the global recovery,” Garcia said.

The Bovespa index fell 1.5 percent to 66,707. The index is unlikely to break its next point of resistance at 69,000 soon if turmoil in global markets persists, said Luiz Borges, an analyst with Tecnica Assessoria de Mercado.

Preferred shares of Vale shed 2.1 percent to 41.07 reais, the steepest drop since March 6. The stock, which is up 10 percent this year, has entered a downward trend in recent days on concern that demand in China and tax disputes in Brazil will weigh on profits, Borges said.

Steelmakers in China are Vale’s largest client. Commodities companies and exporters of raw materials currently account for about 55 percent of the Bovespa.

Oil shares fell, led by OGX Petróleo and Petrobras, likely reflecting “growing fears over demand for commodities in international markets,” said Rafael Dornaus, a trader with Hencorp Commcor in São Paulo.

Limiting the decline in the Bovespa, shares of BR Malls , Brazil’s biggest shopping mall operator, jumped 1 percent. Eletropaulo, Brazil’s biggest power distribution company, gained 0.4 percent.

Both shares are dubbed by investors as “defensive stocks” because of their ability to withstand market slumps.

In Mexico, the IPC index fell for the first session in three, shedding 0.5 percent. America Movil, the telecommunications company controlled by billionaire Carlos Slim, led declines with a 1.4 percent drop.

Chile’s IPSA stock index fell 0.8 percent. Shares of Cencosud fueled the drop, after a 1.6 percent slide.

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