Latam FX range bound in holiday trading, rating risk weighs on Mexico
By Agamoni Ghosh
March 4 () - Most Latin American currencies were range bound in low volume holiday trading on Monday, while stock indices in the region were mixed even as other emerging market peers rose on optimism over the United States and China nearing a trade deal.
U.S. President Donald Trump and Chinese President Xi Jinping might seal a trade deal around March 27, given progress in trade talks, the Wall Street Journal reported on Sunday.
Mexico's peso, as well as stocks, fell after Standard & Poor's revised their credit outlook to "negative" from "stable" for the country late Friday.
The ratings agency warned the country could suffer a downgrade during the coming year given the risk of lower growth and higher contingent liabilities of the Andres Manuel Lopez Obrador-led government.
"In the near-term we could see some downward pressure on the peso in the coming days," said Christian Lawrence, senior market strategist, LatAm, Rabobank.
"As for the sovereign rating, we anticipate the first downgrade to come by this year itself, second-half most likely," he said.
The primary ratings risk for Mexico comes from the mounting debt of state-run oil firm Pemex, which was double-downgraded last month to the last rung of investment grade by Fitch, and market analysts expect further downgrades this year.
The government relies on Pemex to provide around 15 percent of total tax revenue as the company struggles under the weight of nearly $106 billion in debt, the highest of any national oil company in Latin America.
Even as Brazilian markets remained shut, the U.S listed shares of Vale fell as much as 3 percent after its CEO Fabio Schvartsman and three other executives resigned over the weekend.
Stocks in Chile fell to a two-month low, dragged by lithium producer SQM after a brokerage cut price targets on the stock.
Colombia's IGBC index bucked the trend and rose 0.3 percent with energy firm Ecopetrol SA riding on the back of higher oil prices.
Key Latin American stock indexes and currencies at 1800 GMT
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MSCI Emerging Markets
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Argentina peso (interbank)