By Carla Mozee
Mexican stocks edged lower Tuesday, but sharp selling pressure
from swine-flu worries has subsided as investors rooted through
shares battered in the previous session.
Mexico's IPC equity index slipped 0.3% to 21,760.49. On Monday,
the index fell 3.3%, its biggest loss in nearly a month.
The drop in the market on Monday "was more subdued than might
have been feared" after the IPC's run-up since hitting lows in
early March, said Citigroup Latin American strategist Geoffrey
Dennis in a note to clients on Tuesday.
"Therefore, it seems that investors, far from panicking, have
used these tragic circumstances to lighten positions," he
wrote.
The death toll from the swine flu has now reached 152 in Mexico,
and the World Health Organization raised its alert level on the
disease and said containment of the outbreak wasn't feasible.
Economists said a severe swine flu outbreak would amplify the
effects of the global economic downturn.
Air carriers, which suffered the steepest falls on Monday, were
recouping some lost ground. Grupo Aeroportuario del Centro Norte
(OMAB) gained 6.6% as the company reported better-than-expected
first-quarter earnings of 38 pesos a share (21 cents). Its shares
dropped 13% on Monday.
Grupo Aeroportuario del Pacifico (PAC) shares were up 3% after
Monday's 11% stumble.
Mexico's currency was up 0.2% following a more than 4% sell-off
in Monday's session.
Still, Citigroup remains underweight in Mexican equities and
said it's "too early to buy" the market back.
"As Mexicans and potential travelers stay home to avoid
contagion, the most obvious impact will be on tourism, restaurants,
entertainment and retail," said Dennis. "Exporters may benefit from
a lower peso assuming factories continue to operate."
Shares of retailer Wal-Mart de Mexico (WMMVY) rose 0.9%, brewer
Grupo Modelo advanced 3% and discount retailer Comerci gained
4%.
But telecom and manufacturing stocks still struggled, with
conglomerate Grupo Carso off 2.1%, and America Movil (AMX) off 1.4%
ahead of its results, and steel producer Grupo Simec (SIM) down
0.4%.
Brazil slips
In Sao Paulo, a decline in steel stocks helped pull the Bovespa
equity index down 0.8% to 45,472.96. The index dropped 2% on
Monday.
Shares of Companhia Vale do Rio Doce (RIO) fell 1.6% after the
company said first-quarter iron ore output fell 37% to 46.86
million metric tons from the same-period a year-ago as it faces
"unprecedented weak demand conditions derived from the sharp
decrease of global industrial production."
On a quarter-over-quarter basis, production fell 25.9%.
Vale said in a statement that production is being managed "in
line with its assessment of market conditions prevailing in the
short-term."
Shares of steel maker Gerdau (GGB) fell 1.7%, Usiminas declined
2% and CSN (SID) lost 1.4%.
Investors in the steel market also assessed as report from
United States Steel (X) late Monday reported a bigger-than-expected
quarterly loss and slashed its dividend by more than 80%.
Shares of meat producers were mixed. JBS, whose shares slid 12%
a day ago, were up 2.6%. Sadia (SDA) shares in most recent action
were down 6.4% after Monday's climb of 7.8%, and Perdigão (PDA)
gained 1.8%.
Banking stocks were higher ahead of the Brazilian central bank's
decision on interest rates Wednesday. Market players currently
expect policymakers to cut the benchmark rate by at least 100 basis
points from the current rate of 11.25%. Such a move would leave the
rate at its lowest level since the Selic was established in
1996.
Itau Unibanco (ITU) rose 1.7%, Bradesco (BBD) gained 1% and
Bando do Brasil rose 1.6%.