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EMERGING MARKETS-Latam assets rise on upbeat Chinese data, vaccine hopes

Ambar Warrick and Shreyashi Sanyal
·3 min read

* Brazil's real adds to gains after strong November * Latam stocks at highest level since early March * Mexican manufacturing PMI improves slightly * Chilean economy closer to growth after months of contraction (Updates prices throughout, adds comments) By Ambar Warrick and Shreyashi Sanyal Dec 1 (Reuters) - Brazil's real led gains across Latin America on Tuesday, as most other stocks and currencies in the region rose after positive Chinese data and progress on COVID-19 vaccines drove buying into risk-driven assets. The real added 1.9%, even as the pace of expansion in the country's manufacturing sector slowed in November from record levels the prior month. But the reading was comfortably in expansion territory, indicating that economic activity in Latin America's largest economy was on the uptrend. Most other regional currencies rose, with the MSCI's index of Latam currencies adding more than 2% after positive Chinese factory data and hopes of regulatory approval for COVID-19 vaccines drove money out of the dollar and into risk. Latin American stocks and currencies had clocked large gains in November on optimism over a vaccine and stable U.S. politics. But most currencies still traded lower for the year, due to near-term uncertainties caused by the virus. "We remain optimistic that EM economies can weather the deleterious impact of renewed lockdowns far better this time than during the initial coronavirus surge," Ilya Gofshteyn, senior EM macro strategist at Standard Chartered, wrote in a note. Mexico's peso rose 0.7% to the dollar. The currency has benefited recently from optimism over improved U.S.-Mexico trade relations, as well as increased carry interest and higher oil prices. A survey showed the health of Mexico's factories improved slightly in November, though the last time the manufacturing sector was in growth territory was in October 2019, as the economic fallout of the coronavirus pandemic weighs on business. "Following the most challenging year in Mexico's modern economic history, we expect growth to experience a sharp rebound in 2021, though the outlook remains highly uncertain," strategists at UBS wrote in a note. "The Mexican peso should continue to be well-bid in the near term, as a positive global environment will likely prevail over difficult domestic economic and political dynamics." Colombia's peso rose 1.4%, while the Chilean peso gained 0.6% after data showed Chile's economic activity fell 1.2% in October from a year ago, inching closer to growth after months of contraction caused by the coronavirus pandemic. Latin American stocks also rose for the day, tracking gains across the broader emerging space. The MSCI's index of regional stocks jumped 4.5% to their highest level since early March, with Brazilian and Chilean stocks leading gains. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1224.27 1.59 MSCI LatAm 2296.59 4.54 Brazil Bovespa 111471.61 2.37 Mexico IPC 43028.09 2.99 Chile IPSA 4110.47 1.92 Argentina MerVal 55010.80 0.803 Colombia COLCAP 1278.62 1.64 Currencies Latest Daily % change Brazil real 5.2320 2.17 Mexico peso 20.0110 0.77 Chile peso 758.9 0.24 Colombia peso 3546.5 1.35 Peru sol 3.6087 -0.08 Argentina peso (interbank) 81.4300 -0.15 Argentina peso (parallel) 149 4.03 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru; Editing by Nick Macfie and Jonathan Oatis)