EMERGING MARKETS-Brazil pares gains; Mexico's stocks near 2-year low

(Corrects percentage changes in table) By Susan Mathew Oct 29 (Reuters) - Brazil's real and stocks gave up gains on Monday, as initial euphoria following Jair Bolsonaro's presidential win gave way to caution over implementation of his promised policy reforms, while Mexico's stocks hit a near two-year low after a vote to scrap a partially built airport in Mexico City soured sentiment.

The MSCI index of Latin American stocks fell 3.6 percent in its biggest one-day loss in a year and a half, reversing gains and an outperformance of the broader emerging market stock index earlier in the day.

Brazil's Bovespa stock index fell 1.8 percent, after earlier hitting an all-time high, led by losses in material stocks. The currency slipped from a five-month peak and was on track to post its biggest daily fall in eight weeks.

Both had gained more than 14 percent since mid-September when polls started showing market-favorite Bolsonaro in the lead.

"After all the words, action must now follow," You Na Park-Heger, an analyst with Commerzbank, said in a note, adding that "there are a number of risks." Park-Heger cited the recent disagreement over privatization and taxation between Bolsonaro and his market-admired economy adviser Paulo Guedes.

"It therefore remains to be seen to what extent Bolsonaro will give Guedes a free hand. Should there be more disagreements between the two, this would probably burden the real," Park-Heger said.

Mexican stocks sunk close to 4 percent, and the peso tumbled 3.6 percent, on pace to log its worst session since the election of U.S. President Donald Trump in November 2016.

Mexican President-elect Andres Manuel Lopez Obrador said his government would scrap the completion of a partially built $13 billion new airport for Mexico City when he takes office on Dec. 1, after citizens called for abandoning the project in a referendum.

Analysts say that scrapping the airport could prompt an interest rate hike by the central bank at its next meeting to support the peso, and cause violation of international treaties and loss of contracts for companies.

"Lot of concern will be over the policy tact of the new government, and this vote is being taken as a negative sentiment indication on that front," said Sacha Tihanyi, deputy head of emerging markets strategy at TD Securities.

Shares of airport operators ASUR shed 4.6 percent, while those of GAP declined 3.2 percent.

Also on Monday, U.S. officials said thousands of U.S. troops may be headed to the border with Mexico to stop a caravan of migrants trekking toward the United States.

Trump had threatened to close the border if Mexico did not stop the illegal migration - an issue he says is more important to him than the new trade deal with Mexico an Canada.

Meanwhile, the Argentine peso and the Merval stock index pared gains. A decision by the International Monetary Fund to increase the size of standby financing to the recession-hit country to $56.3 billion from the initial $50 billion agreed in June had given a boost to sentiment.

But a stronger dollar and a downturn on Wall Street overtook sentiment, with investors wary of betting on a turnaround in risk amid heightened worries over corporate earnings and global growth.

Key Latin American stock indexes and currencies at Stock indexes Latest Daily % YTD % change change MSCI Emerging Markets 931.90 -0.50 -19.3 MSCI LatAm 2589.93 -2.40 -7.25 Brazil Bovespa 84146.90 -2.27 9.67 Mexico IPC 44025.00 -4.20 -11.09 Chile IPSA 5064.16 -1.17 -1.17 Argentina MerVal 29038.97 -1.60 -3.88 Colombia IGBC 12442.27 -0.11 9.42 Currencies Daily % YTD % change change Latest Brazil real 3.7155 -1.71 -10.82 Mexico peso 20.0960 -3.69 -1.98 Chile peso 690.3 -0.58 -10.96 Colombia peso 3185 -0.25 -6.37 Peru sol 3.354 -0.18 -3.49 Argentina peso (interbank) 36.9000 -0.04 -49.59 Argentina peso (parallel) 36 2.08 -46.58 (Reporting by Susan Mathew in Bengaluru; Editing by Leslie Adler)