SAO PAULO/MEXICO CITY: Latin American stocks rose to their highest since June 2008 on Tuesday, but profit-taking in Mexico and signs Chile's rally may be running out of steam could limit gains in the coming sessions.
The MSCI Latin American stocks index rose 0.42 percent, extending a rally seen since mid-March.
Investors bet a move on Tuesday by China to tighten borrowing costs would help manage to tame strong growth without undermining high prices for Latin America's key commodities.
"China will keep growing, just at a slower pace," said Gerardo Copca, a strategist at consultancy Metanalisis.
China is Brazil's top trading partner and also one of Chile's top customers for its copper.
Chilean stocks led gains in major regional markets, with the IPSA index rising 0.56 percent to close at its highest since late January as industrial conglomerate Copec rose 1.99 percent.
Surprisingly strong growth data in Chile backed bets that the country's stocks could see solid profit growth during the first quarter.
However, the IPSA's relative strength index hit a level that suggested it was overbought, which could push some investors to take profits in the coming sessions. The RSI is used in technical analysis to gauge an asset's momentum.
In Brazil, Adriano Moreno, a strategist with Futura Investimentos, said flows into Latin America had stabilized after foreign investors pulled out of emerging markets during the first quarter of the year to return to developed markets.
Brazilian stocks lagged other major markets in Latin America last year, but high hopes for corporate profits this year were now buoying stocks, he said.
"Generally, there's a more optimistic climate," Moreno said.
Brazil's benchmark Bovespa stock index rose 0.19 percent to close at its highest since January.
The gauge's 14-day simple moving average crossed over its 200-day simple moving average following a strong rally. Brazil's relative strength indicator has more room before reaching overbought territory.
Shares of mining company Vale drew heavy volume on news of a new chief executive pick, but its shares edged up only 0.12 percent.
Vale named former company executive Murilo Ferreira to replace Roger Agnelli, whose relationship with the government soured as politicians said the company does not do enough to invest in Brazil.
"(Ferreira) was well regarded by the market, because it is clear he is not wholly just a political appointment, he has worked in various areas of Vale," said Jose Goes, an analyst at Win Trade, the online broker of brokerage Alpes.
Mexico's IPC index fell 0.19 percent to 37,832.96. The IPC hit resistance at 38,000 points after a near-7 percent jump since March 18.
"This is healthy profit-taking. We need a pullback in order to be able to make further gains," Metanalisis' Copca said.
Analysts said a break above 38,100 to 38,200 in the coming days would be needed to suggest the index could rise further toward its all-time high set in January.
If the resistance levels cannot be broken in the short term, investors could look to take more profits, analysts said.
Shares of top Mexican broadcaster Televisa fell 2.67 percent, hurt by speculation it could pay too much to get a stake in the country's mobile phone markets.
Televisa said on Tuesday it was in talks with cell phone operator Group Iusacell.
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