World Markets

Bovespa down as Vale plummets on dam disaster; Latam FX weakens


By Agamoni Ghosh

Jan 28 () - Stocks in Brazil fell on Monday as shares of Vale plummeted, wiping out nearly $14 billion of the company's market value, in the wake of a dam burst at one of its mines in Brazil that killed at least 60 people and left about 300 missing.

A soft U.S. dollar did little to help developing world currencies as investors gauged market volatility ahead of the U.S. Federal Reserve's policy meeting and U.S-China trade talks this week.

Shares of holding company Bradespar, one of Vale's main shareholders, also declined sharply.

The dam disaster is being perceived as a huge blow to Vale and its Chief Executive Fabio Schvartsman, as investors fret about the financial damages the company may have to face.

"The intangible aspect of this incident is what worries us the most, and at the end of the day the entire mining industry will need to rethink the current model," said analysts Leonardo Correa and Gerard Roure of Brazilian investment banking firm BTG Pactual.

Vale's board has already halted payments and bonuses to executives as well as suspended its shareholder compensation, while Brazil's top prosecutor has said executives of the firm may face criminal charges.

This is the second such disaster in Brazil involving Vale in just over three years. Nineteen people were killed in 2015 when a dam collapsed at a Vale joint venture with BHP.

Brazil's real fell 0.2 percent after data showed the country's current account deficit for 2018 was slightly below the central bank's estimates, while foreign direct investment was better that expected.

Mexico's peso weakened for the first time in five sessions, while Chile's peso fell marginally in line with a slide in the price of copper, the country's main export.

Stocks in Chile fell 0.3 percent, led by declines in shares of Banco de Credito e Inversiones.

Key Latin American stock indexes and currencies at 1400 GMT

Stock indexes Latest daily % change
MSCI Emerging Markets 1028.80 -0.34
MSCI LatAm 2837.49 -1.42
Brazil Bovespa 95782.14 -2.44
Mexico IPC - -
Chile IPSA 5420.27 -0.39
Argentina MerVal - -
Colombia IGBC - -
Currencies Latest daily % change
Brazil real 2.6452 -0.21
Mexico peso 19.0296 -0.26
Chile peso 669.3 -0.33
Colombia peso - -
Peru sol - -
Argentina peso (interbank) - -

Additional reporting by Paula Arend Laier in Sao Paulo

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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