Regional stock indexes across Latin America slipped on Friday as a tax hike on personal credit in Brazil weighed on banks. At the same time, analysts said an increase in foreign capital flows could fuel gains in coming weeks as investor sentiment recovers somewhat from recent unrest in the Arab world and Japan's nuclear crisis.
Data on fund flows showed global investors were returning to Latin American stocks after pulling out capital during most of the first quarter. "Risk appetite is in general picking up," said Kathryn Rooney Vera, an analyst at Bulltick Capital Markets in Miami.
For the week ended April 6, funds reporting on a weekly basis show investors pumped an additional $129.7 million into US domiciled equity funds with a Latin American focus, according to Lipper, a Thomson Reuters service. That marks a turnaround after eleven weeks that showed mostly outflows and only two weeks of slight inflows.
But on Friday, the Brazilian government's clamp down on credit to fight inflation hurt banking shares, which led the Bovespa stock index down 0.66 percent. Brazilian stocks fell almost 0.9 percent during the week, their first weekly dip after a three weeks rally. Shares of Itau Unibanco, the country's largest private sector bank by assets, fell 2.08 percent, with rival Bradesco losing 2.11 percent.
Chile's IPSA index dropped 0.6 percent. Technical indicators on regional stock indexes suggested stocks could snap back after investors booked profits this week on a recent surge that had pushed the MSCI Latin American stocks index up to its highest since June 2008 this week. Also, some investors say Latin America is relatively well positioned to weather high oil prices because much of the region produces crude. That could make Latin American stocks more attractive.
The MSCI Latin American index rose 0.37 percent as its key components companies rose despite overall losses in regional indexes. But analysts said that the drop could open space for further gains in coming sessions. The Bovespa's 14-day simple moving average was rising above moving averages for longer terms and momentum indicators also pointed to further gains.
But analysts said the effects of the tax on bank stocks would likely be short-lived, with a drop in Friday's session opening space for more gains to come. "This isn't going to bring major changes to bank profits in Brazil," said Fabio Cardoso, a partner at Adinvest in Rio de Janeiro. "In the medium-term, this will have a null effect."
Mexico's IPC stock index closed flat for the day and down 0.8 percent for the week. But the upcoming earnings season in the United States - the world's largest economy, which consumes about 80 percent of Mexico's exports - could buoy those equities next week. Chart analysts see further gains ahead, looking at short term targets of 38,000 and 38,500 points.
Shares of America Movil, one of the world's biggest telecommunications company, shed 0.9 percent. Chilean stocks were nearly flat for the week after stocks retreating from levels that the relative strength index, a technical indicator of momentum, suggested were overbought.