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EMERGING MARKETS-Brazil markets rise after pension reform approval, c.bank meeting awaited in Chile

Credit: REUTERS/PILAR OLIVARES

Brazil stocks scaled new highs and the currency posted modest gains on Wednesday after the Senate approved a crucial pension reform bill, while Chile markets weakened ahead of a central bank decision on interest rates amid severe domestic unrest.

By Susan Mathew

Oct 23 (Reuters) - Brazil stocks scaled new highs and the currency posted modest gains on Wednesday after the Senate approved a crucial pension reform bill, while Chile markets weakened ahead of a central bank decision on interest rates amid severe domestic unrest.

Brazil's Senate approved the main text of the government's landmark pension reform proposal late on Tuesday. Once voting to approve the last four amendments concludes on Wednesday, the bill will be cleared to be signed into law.

The reform is seen by the government and many economists as crucial to stabilizing Brazil's public finances and restoring business confidence, conditions they say will lead to stronger and more sustainable growth in Latin America's largest economy.

In anticipation of the approval, bulls took the country's benchmark stock index .BVSP to an all-time high last session and the currency BRL= had risen more than 1%. On Wednesday both gained around 0.4%.

"Markets had already priced in the passage of reforms," said Elisabeth Andreae, EM analyst at Commerzbank.

She warns that looking ahead, there is limited appreciation potential for the currency as there are other urgently needed reforms and markets are a bit skeptical about their passage as they may face strong resistance.

In Chile, the peso CLP= lost 0.4%, while stocks .SPIPSA shed 0.7%, ahead of a central bank meeting as the country braces for more protests and a general strike by state workers on Wednesday.

President Sebastian Pinera's announcement of ambitious reforms failed to quell unrest that has rocked the country and led to at least 15 deaths. Protests against high cost of living were sparked by a recent hike in public transportation and have been ongoing since the weekend.

A Reuters polls earlier this month had shown expectations of a quarter percentage point cut in rates, but analysts say the protests have raised the possibility of a sharper 50 basis point cut.

"Recent domestic events should support (the central bank's) easing bias," analysts at Morgan Stanley said in a note.

"While we think that a 50bp cut is possible in today's decision, we don't see it as the base case and think that the governing board would prefer to leave the door wide open for further cuts."

The bank had slashed the interest rate by 50 bps last month.

Most other regional currencies made minor moves against a steady dollar. FRX/ While Wall Street made lackluster moves amid a slew of earnings, most Latam stock markets attempted gains. .N

Argentine stocks .MERV rose more than 1% to hit a 10-week high.

Key Latin American stock indexes and currencies at 1443 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1030.07

-0.39

MSCI LatAm .MILA00000PUS

2772.47

0.31

Brazil Bovespa .BVSP

107811.99

0.42

Mexico IPC .MXX

43379.77

0.04

Chile IPSA .SPIPSA

4957.85

-0.7

Argentina MerVal .MERV

33722.09

1.381

Colombia IGBC .IGBC

13073.43

-0.43

Currencies

Latest

Daily % change

Brazil real BRBY

4.0670

0.17

Mexico peso MXN=D2

19.1370

0.03

Chile peso CLP=CL

726.9

-0.43

Colombia peso COP=

3420.75

0.24

Peru sol PEN=PE

3.3468

0.07

Argentina peso (interbank) ARS=RASL

58.8900

-0.32

(Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130))

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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