By Carla Mozee
Chilean stocks fell for a third consecutive session Wednesday,
with construction and industrial stocks pulling back from recent
gains in the wake of a huge earthquake that will require
significant effort to rebuild and repair infrastructure.
Chile's IPSA equity index fell 1.5% to 3,708, pushing its
three-day loss tally to more than 3%.
Losses among Chilean stocks accelerated following reports that a
strong aftershock hit 25 miles north northwest of the city of
Concepcion Wednesday afternoon, triggering a tsunami warning for a
portion of Chile's coastal areas. The U.S. Geological Survey said a
5.9 magnitude aftershock struck at 2:44 p.m. local time, the latest
of aftershocks to have hit the area in the past 24 hours.
In exchange-traded funds action, the iShares MSCI Chile
Investable Index fund (ECH) fell 0.5%.
In Santiago, the construction group fell nearly 3%, with shares
of Salfacorp down 1.1%. Its shares have climbed more than 7% since
Monday with investors casting an eye toward companies that are
likely to be involved in the hefty task of repairing roads,
bridges, and building damaged by Saturday's temblor.
Besalco shares fell 1.7% on Wednesday, easing from their 10.8%
jump in the previous session, while stock in Socovesa gave up
4.7%.
Also, shares of Cementos Bio-Bio fell 15%, giving back about
half of Tuesday's advance, and retailer La Polar shares fell 4.4%,
leading volume movers.
Pulp and paper products providers also struggled, with companies
dealing with flooded and damaged facilities. Stock in Empresas CMPC
fell 1.6%, extending losses of 2.8% on Tuesday after the company
declared force-majeure for an initial period of 30 days because of
the earthquake.
At the same time, shares of Copec slumped 4.3%, adding on to
losses of more than 2% on Tuesday.
Also Wednesday, the Chilean government raised the death toll
from Saturday's earthquake to 799. More than 2 million people have
been displaced, and Chile has asked for aid from other
countries.
Chile's currency continued to rise against the dollar on
expectations that the government will tap an $11 billion fund to
pay for reconstruction projects, which would prompt conversion of
the funds from dollars into local currency. The currency rose to
516.51 pesos per dollar versus 518.80 pesos on Tuesday.
Citigroup earlier this week said that the central bank is likely
to delay a rate hike in the aftermath of the earthquake, lowering
the probability of the broker's call that the central bank would
begin raising its key rate in May.
"We believe this is a temporary supply-side shock, and hence it
should be accommodated by the [central bank], even if inflation
goes up in the short term as we expect," wrote Citi analyst Marcos
Buscaglia in a note to clients. "Only if expectations get
un-anchored we would expect the central bank to react."
Chile's key TPM rate currently stands at the historically low
level of 0.5% following an aggressive series of rate cuts by the
central bank in response to the worldwide financial crisis.