SAO PAULO: Latin American stocks rose on Thursday on signs Brazil's central bank may soon stop hiking interest rates, and Mexico's market rose for the second session after pension funds were allowed to invest more in equities.
The regional MSCI Latin America stock index increased by 0.68 percent as Brazil's market bounced back after closing at its lowest since May 2010.
"This is more of an adjustment, than a sustainable rise," said Pedro Galdi, an analyst at brokerage SLW in Sao Paulo.
Minutes from Brazil's policy meeting last week hinted its central bank may decide to keep interest rates unchanged after hiking them five times this year, taking its benchmark rate to 12.50 percent -- the highest of any major economy.
Rising interest rates have hurt Brazil's stock market as investors expect higher borrowing costs will crimp growth.
"The minutes ... signal there will not be any more interest rate hikes, that is increasing appetite for stocks and bank shares are gaining," Galdi said.
Still, investors are anxious to see signs Brazilian inflation, which is around a six-year high, will wane before diving back into stocks, analysts said.
Surprisingly strong US labor and housing data also eased fears that slowing growth in the United States, one of Latin America's top trading partners, will curb demand for the region's exports.
But a political deadlock over raising the US debt ceiling before an Aug. 2 deadline limited gains. If the US defaults, or ends up seeing a downgrade, interest rates there could rise and weigh down the economic recovery there.
"(Today's) gains are fragile. I don't think this will last," said Jose Francisco de Lima Goncalves, chief economist with Banco Fator in Sao Paulo. "I think the environment will tend to sour."
Brazil's benchmark Bovespa advanced 0.72 percent as credit card payment processors led gains. Shares of Redecard jumped 5 percent as Cielo moved up 2.79 percent. Net income at Redecard dropped in the second quarter but still beat analysts' forecasts.
Banco Bradesco, Brazil's fourth biggest bank, rose 1.8 percent despite second-quarter results on Wednesday that missed estimates.
Mexico's IPC index rose 0.9 percent as the market continued to benefit from rule changes on Wednesday allowing local pension funds to increase their equity holdings.
"This is having a really positive reaction," said Juan Jose Resendiz, head of analysis at brokerage Arka. "It seems the government wanted to keep the market from falling, like in the 1990s when the (government development bank) would step in to buy shares."
Shares of Mexican heavyweight America Movil, one of the world's biggest telecommunications companies, rose 0.99 percent as Walmex, the country's leading retailer, put on 2.45 percent as it rebounded from its lowest price since October.
Chile's IPSA index gained 0.48 percent after closing at its lowest since March in the previous session. Retailer Falabella led gains, rising 1.64 percent.
Copyright Reuters, 2011
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