By Carla Mozee
Mexican stocks finished at record highs Tuesday, with advancers
led by Grupo Mexico SAB after a brokerage started coverage of the
copper miner with a buy rating.
Mexico's IPC index rose 0.5% to 33,801.21, with gains led by
mining, manufacturing and finance stocks. The market reached a
record close in the previous session.
Grupo Mexico shares climbed 4.7% on Tuesday, their best gain
since early February after UBS Pactual initiated coverage with a
buy rating and a price target of 44 pesos ($3.60).
The broker cited its near-term expectations for copper prices to
reach $4 a pound, and a potential spin-off of Grupo Mexico's
railway assets as reasons for its view, wrote analyst Rene Kleyweg
in a note Tuesday.
In Buenos Aires, the key equity index also finished at a record
high. The Merval climbed 1.5% to 2,506.14, led by a 5.6% jump in
shares of steel producer Siderar (ERAR.BA). Argentine assets
continue to rally as positive signals emerge regarding the debt
swap "of up to $20 billion in defaulted bonds," wrote
emerging-market analysts at RBC Capital Markets.
Stocks in Mexico and Argentina held to higher ground as minutes
from the U.S. Federal Reserve's latest rate meeting showed that a
pledge by policy makers to leave interest rates low is dependent
upon economic conditions, not calendar considerations.
Fed experts have informally translated the "extended period" to
mean six months.
However, the "extended period" pledge will not keep policy
makers from raising rates early if it appears that the economy is
overheating, according to the minutes.
The minutes from the March 16 Federal Open Market Committee's
meeting had a "dovish tone," according to Alan Levenson, chief
economist at T. Rowe Price, in a clients' note.
This "does not sound like a group that was just a single
weather-boosted employment reading from softening its commitment to
the current policy stance for an extended period," he wrote. "We
see that rhetorical change as substantially more likely at the June
FOMC meeting than at this month's meeting."
On Wall Street, the S&P 500 Index (SPX) rose 0.2% to reach
fresh 18-month highs, while the Dow Jones Industrial Average (DJI)
slipped 4 points to 10,969.
Chile central bank cuts growth outlook
Elsewhere, Chile's central bank released its quarterly policy
report, in which it cut its 2010 growth forecast as it considered
the impact from a strong Feb. 27 earthquake. The central bank now
expects growth of 4.25% to 5.25%. It has previously expected growth
of 4.5% to 5.5%.
Policy makers also raised its inflation forecast for the year to
3.7% from 2.5%. The central bank said its key rate is poised to
rise to 2% to 2.5%, with higher rates aimed at tamping down
inflationary pressures. The key TPM rate now stands at 0.5%, a
historic low.
The government has said the magnitude 8.8 earthquake caused up
to $30 billion in damages.
Chile's IPSA index rose 0.7% to 3,853.75. In Brazil, the Bovespa
slipped 0.3% to 71,095.65.
Back in Mexico City, UBS Pactual also put a $40 price target on
Grupo Mexico's main mining unit, Southern Copper Corp. (SCCO), as
it believes "the shares can trade higher on copper price momentum."
Grupo Mexico's assets also include miner Asarco and railroad firm
Grupo Ferroviario Mexicano.
UBS said the strong historical trading correlation of Southern
Copper shares to copper prices suggests the company's shares will
rally to $40 on UBS' 2010 estimated copper price of $3.80 a
pound.
For Grupo Mexico, "this alone implies 33% upside," for the
stock, wrote Kleyweg. "A spin-off of the railway assets and a
narrowing of the holding company discount to 5% would increase
upside to 50%."
NYSE-listed shares of Southern Copper closed Tuesday's session
0.6% higher at $34.49.
Copper prices were hurt by profit-taking, losing a penny, or
0.4%, to $3.6170 a pound.