By Gabriel Burin, Paula Laier and Miguel Gutierrez
BUENOS AIRES/SAO PAULO/MEXICO CITY, Feb 26 (Reuters) - Brazilian stocks are forecast to soar nearly 19% by the end of 2020, logging a fifth year of solid gains, according to a Reuters poll of market strategists who were looking beyond current jitters over the coronavirus outbreak.
The benchmark Bovespa stock index .BVSP is forecast to rise to 135,000 points by the end of 2020, a 18.8% increase over its last mark before Carnival holidays this week, according to the median estimate of 15 strategists surveyed Feb 13-25.
But stocks will be volatile in the near term, as reflected in the wide 22,000-point spread in predictions for mid-year in the poll. In the meantime, the deadly coronavirus epidemic continues to dampen the mood of global stock markets, and Brazil on Wednesday confirmed its first case of coronavirus, a source said.
"The scenario remains positive, even with some external challenges ahead such as the slowdown in China due to the coronavirus," said Regis Chinchila, an analyst at Terra Investimentos.
"Progress in tax and administrative reforms will improve the business climate and attract foreign investors in the second half," he added. This would push Brazil's equities to record highs after June, as has been the case from 2016.
So far this year, the Bovespa is down 1.7%. Like other stock markets, Sao Paulo's main index has been hit by concerns about the hit of weaker Chinese activity on the world economy as the number of coronavirus cases piles up.
Solid earnings among domestic companies like planemaker Embraer EMBR3.SA offer support. However, for such corporate dynamism to continue, Brazil's economy will also have to finally pick up and escape from its weakest recovery on record.
President Jair Bolsonaro's government failed to prompt growth through reforms in 2019 and the macro picture is uncertain, but stock market players remain bullish after seeing the value of their bets on the Bovespa triple in four years.
MEXICO SHARES IN A RANGE
In Mexico, the S&P/BMV IPC index .MXX is expected to rise 11.5% by year-end to 48,000 points. Considering downside risks, the estimate suggests Mexican stocks may actually stay flat, near the middle of a range that set in seven years ago.
Reinforcing this view, the index is now virtually at the same level where it was at the start of 2020, little affected by coronavirus worries, as growth in Mexico is less dependent on exports to China than in Brazil.
Some help could come from policy easing by the central bank, struggling to resurrect an economy that contracted last year as companies curbed investment due to concerns over the economic management of President Andrés Manuel Lopez Obrador.
"Interest rate cuts could be a key catalyst for stocks," said Carlos González, equity strategy director at Monex. "Even so, continuing antagonism between business leaders and Mexico's government will keep capping any potential upside."
In a case that tests the climate for private investors, a dispute between Mexican state oil company Pemex and U.S.-based Talos Energy Inc TALO.N has slowed talks to develop a major discovery.
Prior to a 2013 constitutional reform that ended Pemex's 75-year monopoly - a reform fiercely opposed by López Obrador - only the state-owned company could explore for and produce oil and gas in the country.
Mexican stocks are trading more than 10% above a five-year low where they fell in 2019 after U.S. President Donald Trump threatened to impose tariffs if Mexico did not curb immigration across the border.
But the S&P/BMV IPC is down by roughly the same amount from a peak it reached during the reform-oriented government of former President Enrique Peña Nieto. "There is no clear policy aiming at giving certainties to investors," said González.
(Reporting by Gabriel Burin; Polling by Miguel Ángel Gutiérrez in Mexico City and Paula Arend Laier in Sao Paulo; Additional polling by Mumal Rathore and Tushar Goenka Editing by Ross Finley and Steve Orlofsky)
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