EMERGING MARKETS-Latam stocks gain on trade hopes; Argentina hit by new debt plan

By Sruthi Shankar

Aug 29 (Reuters) - Latin American stocks gained ground on Thursday after China said it hoped for a de-escalation of trade tensions with the United States, although a firmer dollar pressured most regional currencies.

The Brazilian real BRL= edged up 0.15%, struggling to recover from its lowest level this year despite data showing Brazil's economy rebounded strongly in the second quarter after having shrunk in the first, meaning Latin America's largest economy comfortably avoided falling back into recession.

The currencies of Colombia COP= and Mexico MXN= were largely flat as the dollar firmed against a basket of major currencies after data showed the strongest growth in U.S. consumer spending in 4-1/2 years even as economic growth slowed in the second quarter.

However, all the spotlight was on Argentina's markets after the government announced plans to "reprofile" about $100 billion of its debt on Wednesday.

In response, Argentina's peso ARS=RASL fell 2.6% to 59.65 per dollar and bond prices headed to a record low, while its country risk soared to levels not seen since 2005.

"Despite the market reaction, I do believe taking steps to preserve foreign exchange is a positive. There are lots of questions around the voluntary reprofiling nature of the dollar debt," said Jim Barrineau, head of emerging markets debt at Schroders.

"I don't expect those questions to get resolved until the (Argentina) election. But right now, the key aspect of this is stabilizing the currency, preventing significant reserve drawdown. If they can do that, investors over time at current prices will be buyers rather than sellers."

The peso has shed about 24% of its value since business-friendly President Mauricio Macri's suffered an unexpectedly large defeat in an Aug. 11 primary election at the hands of populist-leaning Peronist candidate Alberto Fernandez. Argentina's general election will be held on Oct. 27.

The Merval .MERV also dropped about 4%, bucking the upward trend in Latin American stocks after China's commerce ministry said Beijing and Washington are discussing the next round of talks scheduled in September and hoped U.S. officials could cancel the planned additional tariffs to avoid an escalation.

The Bovespa .BVSP jumped 1% to post its third straight day of gains, recovering from its lowest level in nearly three months, helped by shares in miner Vale VALE3.SA and oil company Petrobras PETR4.SA.

Latin American stock indexes and currencies at 1422 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

969.81

0.46

MSCI LatAm .MILA00000PUS

2526.14

0.69

Brazil Bovespa .BVSP

98977.00

0.8

Mexico IPC .MXX

41390.97

1.1

Chile IPSA .SPIPSA

4659.47

1.08

Argentina MerVal .MERV

24505.51

-3.895

Colombia IGBC .IGBC

12468.81

0.22

Currencies

Latest

Daily % change

Brazil real BRL=

4.1621

0.15

Mexico peso MXN=D2

20.0709

0.13

Chile peso CLP=CL

719.95

0.43

Colombia peso COP=

3471.43

0.05

Peru sol PEN=PE

3.3898

0.33

Argentina peso (interbank) ARS=RASL

59.6500

-2.6

(Reporting by Sruthi Shankar in Bengaluru Editing by Paul Simao)

((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 6328))

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