LATIN AMERICA Latin America Market .LATIN AMERICA Latin America Market Monitor ... Am. Movil 28.32

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  • Equities BBVA Research Monday, January 5, 2004LATIN AMERICA

    Latin America Market Monitor Research Ideas from BBVA

    Regional Market Snapshot (1/2/04) Change in US$ (%) ADR

    (US$) Vol. (000) Day YTD

    Telecom Telmex 33.11 64.61 0.2 0.2%Am. Movil 28.32 38.97 3.6 3.6%Telemar 15.57 15.14 0.9 1%Brasil Tel. 38.29 6.56 1.3 1.3%Telesp Cel. 6.43 4.69 -2.3 -2.3%Tel. Chile 6.12 1.44 (0.01) -1%CANTV 33.11 64.61 0.2 0.2%

    Financials Bco. Itau 48.74 5.22 (0.00) 0%Unibanco 25.00 10.90 0.00 0%Bradesco 26.30 6.58 (0.00) 0%Bco. Do Brasil 8.23 1.93 (0.01) -1%BBVA Banc*. 0.88 10.09 0.03 3%GF Norte* 3.52 2.39 0.01 1%Credicorp 13.39 0.41 0.00 0%Santander 23.65 2.15 (0.01) -1%

    Basic Materials Cemex 26.45 26.38 0.01 1%CVRD 52.99 19.65 0.03 3%Petrobras 30.20 32.00 0.03 3%Aracruz 35.20 8.27 0.00 0%Buenaventura 28.06 0.29 (0.01) -1%

    Retail& Beverages Walmex* 28.65 1.46 0.01 1%PaodeAcucar 25.08 3.06 (0.00) 0%Femsa 37.01 12.25 0.00 0%KOF 21.03 3.66 (0.01) -1%Ambev 25.92 13.75 0.02 2%Andina 10.65 0.20 0.01 1%DYS 21.55 1.92 0.04 4%CCU 21.74 0.51 0.01 1%Comerci* 20.50 0.04 0.04 4%

    Media Televisa 40.08 18.73 0.01 1%TVAzteca 9.20 5.52 0.01 1%

    Other Embraer 35.40 15.76 0.01 1%GEO 5.18 1.53 0.01 2%ARA 2.53 1.55 0.02 2%

    ECONOMICS 2004 looks to be a difficult year for emerging market debt, with trading strategies focused on a possible H104 sell off in the US Treasury market and a H204 risk of contracting global liquidity. Through Q104, we anticipate high global liquidity continuing to support the current record EM debt levels. This follows an exceptional 2003 performance that increased total returns by 28.6%, led by strong inflows resulting from excess global liquidity. The EMBI+ spread over UST tightened by 341bps during the year to close at 418bp. Ecuador led the pack with a 99.7% total yearly return, followed by Brazil with a 68.3% return and Venezuela with a 50.4% return. The Latin component of tEMBI rallied by 35.1% versus a 20.2% return on the non-Latin

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    p The regional currencies begin 2004 on a positive note following the remarkable appreciation of 2003 with the exception of both the Mexican peso (closing the year 7.7% weaker) and the Venezbolivar (following a 13.3% devaluation last February.) ThBrazilian real and the Chilean peso showed the strongest appreciation in the region. The real strengthened by 21.9% on the turnaround of expectations and good policies driving country riskdownwards and the peso by 21.7% on the revival of growth and strong copper prices. The Argentine peso followed with a 13.9% appreciation on the back of a trade and current account surplus adespite disappointments on fundamentals, even the Colombian peso posted a 3.2% appreciation, given strong capital repatriation in 2003. We expect this pattern to continue through at least the firsthalf of 2004, as the LatAm currencies benefit from the supportiexternal environment, global and regional economic recovery, stronger commodity prices and weaker dollar (the Mexican peremaining on the weaker side for now). The risk to our 2004 outlook would involve a sudden with

    MEXICO On December 30, Congress approved the Ps1,650bn 2004 budget (Ley de Egresos) with a 370 to 93 vote led by the PAN, PRI, PTPVEM and Convergencia parties with the PRD voting against. The approved budget was in line with the austere proposals of the government, following the total failure to approve any tax reform initiative, instead bringing about another weak fiscal miscell

    ,

    aneous (Ley de Ingresos) reminiscent of the one approved in 2001.

    Page 7

    r-end as liquidity gets squeezed. Page 3

    *Price and % change in P$ Source:Bloomberg

    REFER TO IMPORTANT DISCLOSURES AT THE END OF THIS REPORT BBVA and/or any of its affiliates has, or could have, a business relationship, including that of a commercial or investment banking nature, with any of the companies mentioned in this report. Please see the accompanying disclosures at the end of this report for the Analyst Certification.

  • BBVA Research

    Trading Desk Notes

    There were no Trading Desk Notes for Friday, January 2, 2004.

    Latin America Market Performance and BBVA Valuations (1/2/04) Argentina Brazil Chile Mexico Peru Merval Bovespa IPSA IPC IGBVL Latin America Indices Index Close 1,102 22,445 1,485 8,818 2,494 % ch day (local curr.) 2.8 0.9 0.0 0.3 2.4 % ch day (US$) 3.2 1.4 1.3 1.6 2.4 % ch week (US$) 7.2 4.5 2.9 3.4 8.2 % ch quarter (US$) 29.9 30.6 13.1 14.9 23.6 % ch 12 month (US$) 136.0 124.3 79.2 32.5 77.6 Mkt cap (US$bn)* 13.75 142.2 61.7 100.9 15.8 Key Market Data EMBI+ NA NA NA NA NA Local Currency/US$ 2.93 2.88 585.40 11.07 3.46 BBVA Latin America Valuations P/E 03E (x) nmf NA 27.1 13.9 16.4 P/E 04E (x) 11.2 NA 22.6 12.2 51.7 EV/EBITDA 03E (x) 6.5 NA 10.1 7.1 NA EV/EBITDA 04E (x) 5.6 NA 8.0 6.4 NA EPS Growth 04E (%) nmf NA 20% 14% -68% Ebitda Growth 04E (%) 27% NA 9% 9% 16% P/BV 03 (x) 2.1 NA 1.9 2.5 NA P/CF 03 (x) 26.8 NA -10.1 8.6 NA All market capitalization data sourced from Bloomberg except for Argentina, which reflects our coverage universe. Source: Bloomberg, Reuters and BBVA Latin America Equities estimates

    Refer to important disclosure at the end of this report Page 2

  • LATIN AMERICA LATIN AMERICA Economics Monday, January 5, 2004BBVA ResearchLATIN AMERICA

    Latin America Amalia EstenssoroBBVA Securitiesamalia.estenssoro@bbvany.com

    212.728.2340

    Economic Update

    Fixed Income & Foreign Exchange Overview 2004 looks to be a difficult year for emerging market debt, with trading strategies focused on a possible H104 sell off in the US Treasury market and a H204 risk of contracting global liquidity. Through Q104, we anticipate high global liquidity continuing to support the current record EM debt levels. This follows an exceptional 2003 performance that increased total returns by 28.6%, led by strong inflows resulting from excess global liquidity. The EMBI+ spread over UST tightened by 341bps during the year to close at 418bp. Ecuador led the pack with a 99.7% total yearly return, followed by Brazil with a 68.3% return and Venezuela with a 50.4% return. The Latin component of the EMBI rallied by 35.1% versus a 20.2% return on the non-Latin part of the index. The regional currencies begin 2004 on a positive note following the remarkable appreciation of 2003 with the exception of both the Mexican peso (closing the year 7.7% weaker) and the Venezuelan bolivar (following a 13.3% devaluation last February.) The Brazilian real and the Chilean peso showed the strongest appreciation in the region. The real strengthened by 21.9% on the turnaround of expectations and good policies driving country risk downwards and the peso by 21.7% on the revival of growth and strong copper prices. The Argentine peso followed with a 13.9% appreciation on the back of a trade and current account surplus and despite disappointments on fundamentals, even the Colombian peso posted a 3.2% appreciation, given strong capital repatriation in 2003. We expect this pattern to continue through at least the first half of 2004, as the LatAm currencies benefit from the supportive external environment, global and regional economic recovery, stronger commodity prices and weaker dollar (the Mexican peso remaining on the weaker side for now). The risk to our 2004 outlook would involve a sudden withdrawal of funds from EM by year-end as liquidity gets squeezed.

    Brazil On Thursday, the CPI-FIPE will announce annual inflation figures near 8%, providing increased credibility for the central bank after one year of PT government. Also on Thursday, the very important industrial production numbers for November will be released, and we anticipate a positive performance in both the seasonally adjusted and annual readings. The trade balance posted a record surplus of $24.8bn in 2003, with 21.1% YoY export growth, slightly more than half of which was price-driven rather than based on a volume increase. Additionally, imports grew by 2.2% YoY. We expect the pattern of growth between exports and imports to reverse in 2004, reducing the trade surplus result to around $18bn in 2004, a very good result nonetheless. Commodity prices maintain their momentum with possible risks

    Refer to important disclosure at the end of this report Page 3

  • BBVA Research

    linked to a trend shift leading to tightening policy in Asia, which is not expected in the near future. Annual Brazilian trade balance and three-month export/import growth

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    Mexico This Friday, at the first monetary meeting of the year, the central bank is unlikely to adjust current policy (just yet), but special attention will be given to any risk of inflation pass-through from a weaker exchange rate following the release of Thursdays 2003 annual inflation numbers. 2003 inflation approached 4.0% compared to a target of 3.0% with a +/- one percentage point band around the target; just enough to maintain central bank credibility for now. But we believe there remains a possibility for H104 central bank action if the currency continues to weaken from its Ps11.237 year-end close. The domestic fundamental issues driving th