BENGALURU: Brazilian stocks and the real traded lower on Monday, leading declines among regional peers as trading remained thin in the last week of a year in which Latin American assets have performed better than most other emerging markets.
Brazil’s real fell 0.6% against the dollar, while Sao Paulo stocks shed 0.7%. The MSCI’s index for Latam stocks shed 1.3%, but was set to rise close to 2% in 2022.
The broader emerging market equities index is down more than 22% for the year, with many market players pointing to Latin America’s heavy exposure to commodities as one of the factors that have fueled the outperformance.
“Economies (in Latam) rebounded strongly from the Omicron wave, surging commodity prices following Russia’s invasion of Ukraine gave a boost to the region’s exports and economies were more resilient to high interest rates than we’d thought,” said Kimberley Sperrfechter, emerging markets economist at Capital Economics.
But Sperrfechter warned of sticky inflation in the region and tighter monetary policies, “while central banks in Latin America are likely to be among the first to cut interest rates next year, they will generally do so only gradually and rates will remain in restrictive territory throughout the year.”
Chile’s peso shed 0.1%. A poll of traders showed Chile’s central bank is expected to keep its benchmark interest rate at 11.25% at its January meeting, before an easing cycle that would take rates to 6.5% within 12 months. Stocks in the region fell 0.4%.
Mexico’s peso fell 0.2%, but Colombia’s peso and Peru’s sol rose 0.1% and 0.3% respectively.
Trading volumes were likely to be thin through to day as US and European markets were closed on Monday for the long Christmas holiday weekend.
In other EMs, Turkey’s lira briefly touched a record low of 18.8440 against the dollar early, bringing its losses this year to 30%, after a period in which Ankara has followed policies tightly controlling the exchange rate.
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