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Bolsas take opposite routes
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December 8, 1998: 4:34 p.m. ET
Brazil takes a spill while Caracas enjoys bonanza day on Chavez cheer
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NEW YORK (CNNfn) - The major Latin bolsas, reacting to domestic political and economic news as well as a weak showing on the Dow, kept investors on the move Tuesday.
Venezuelan stocks turned in the most dramatic performance, leaping a stunning 22 percent as traders took comfort in the promises of moderation by President-elect Hugo Chavez.
Brazil's Bovespa index moved in the opposite direction, falling 4 percent, as market players worried about an upcoming vote Wednesday on social security reform.
And in Mexico, after the Dow took a turn for the worse stocks let slip their initial gains earned from optimism over a potential solution to a bank bailout scandal.
Brazil stocks beaten by caution
Brazilian stocks ended down 4 percent in thin trade on Tuesday, with equity prices falling on Wall Street and local investors turning a cautious eye toward congressional voting set for Wednesday, traders said.
The blue-chip Bovespa index ended down 317 points, or 3.98 percent, at 7,629 points. It is down 25 percent so far in 1998.
"As the market lacked liquidity, it tended to follow the Dow Jones industrial index," said one trader. "Investors were also cautious about tomorrow's vote in Congress."
Shares worth an estimated 390 million reais ($325 million) changed hands on Tuesday.
The Dow Jones industrial average was down more than 100 points at the Bovespa's close.
Telebras preferred receipt, the Sao Paolo market's benchmark, dropped 4.5 percent to 103 reais, while Petrobras preferred lost 3.6 percent to 160 reais.
Brazil's Congress was due to vote on Wednesday on a government bill that would start charging nonprofit institutions for social security benefits. Last week the government lost a vote on a key bill that would have allowed the state to charge retired civil servants and widows for benefits.
Both measures were designed to help relieve a massive social security deficit, a chief contributor to the country's troubling fiscal deficit. The defeat last week was followed by a steep slide in share prices.
Venezuelan shares soar
The Caracas stock market closed up a 22 percent Tuesday as investors welcomed moderate policy statements from President-elect Hugo Chavez.
The IBC index closed up 871 points at 4,790 points. The volume of trade was high, with shares worth 5.4 billion bolivars (US $9.5 million) changing hands compared with 2.6 billion bolivars (US $4.5 million) Friday.
The huge rally, which took many traders by surprise, gathered pace during the day, as relief grew that Chavez did not appear to be proposing regulations or controls on Venezuela's economy, as many had feared.
"I have never seen an increase like it. I don't think any stock market in the world has risen more than 20 percent in a single day," said Rafael Alcantara of Cavelba, who has worked as broker in the local market for the last 28 years.
"The reason behind the rise is the change in perception of Hugo Chavez, both among local investors and foreigners. The statements from the president-elect were taken very positively by the market," said Hector Perez of Inverunion.
Despite Chavez's efforts to moderate his fiery rhetoric during the presidential campaign, the stock market had remained skeptical toward the former coup leader and prices languished. Ahead of Sunday's election, the market was down around 54 percent in nominal terms from the start of the year.
On Tuesday, the market erupted with relief at Chavez's first statements as president-elect, which implied that "we will not have radical changes in policy," Perez noted.
The "direction of the market will depend on Chavez's next statements and who is named to the cabinet," he added.
Buying interest came from both local and overseas investors and was accompanied by a rally in the price of Venezuelan American depositary receipts in New York, Perez said.
Electricidad de Caracas, the benchmark stock, led the market higher, closing up an enormous 29.9 percent, or 51.5 bolivars, to close at 223.50 bolivars a share.
Mexico lets go gains
Weighed down by a sagging Dow, the Mexican bolsa could not hold onto gains of more than 1 percent earlier in the day.
By the close of trade, the leading IPC index had fallen 27.43 points, or 0.72 percent, to 3,779.53.
In early trade investors cheered reports that a solution may soon be found to the $60-billion Fobaproa bank bailout scandal, traders said.
Mexico's conservative opposition National Action Party (PAN) and the ruling Institutional Revolutionary Party (PRI) separately filed draft proposals late on Monday to a congressional committee working on a solution to the issue.
The government wants to transfer Fobaproa's debts, picked up after the 1994 peso crash to save the banks from collapse, onto public accounts. But opposition parties refuse, saying they do not see why taxpayers should pick up the tab for fraudulent loans made by poorly supervised banks.
Markets in Chile, Peru and Argentina were closed Tuesday for the Feast of the Immaculate Conception. 
-- from staff and wire reports
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