EMERGING MARKETS-Latam FX, stocks slip as China data dents risk appetite

By Susan Mathew

Aug 16 (Reuters) – Most Latin American currencies fell on Monday as weak data from China, a top trading partner for most economies in the region, sapped risk appetite.

Losses in Peru’s sol PEN= were marginal, limited by data showing Peru’s economy grew 23.45% in June, its fourth consecutive month of growth, as construction, manufacturing and trade surged back from low points last year.

Meanwhile, ceilings on public spending and debt have been restored after lifting them during the pandemic, the economy ministry said over the weekend. Starting in 2022, Peru’s deficit will not be higher than 3.7% of GDP, and public debt should not be higher than 38% of GDP, the ministry said.

Chile’s peso CLP= led losses in the region as prices of top export item, copper, slumped on demand fears after data showed China’s economy may be slowing. {MET/L}

Mexico’s peso MXN=ducked the gloom, firming 0.1%. The peso, a carry trade favorite, is up 0.2% so far this month in what could be its sixth straight month of gains and the longest such streak since 2008.

Carry trade is when investors borrow in a low-yielding currency to invest in higher-yielding assets. A hawkish Mexican central bank and a dovish U.S. Federal Reserve have helped keep interest rate differentials attractive, keeping the peso well bid.

“We think that the pace of the regional (Latam) recovery will beat most analysts’ expectations in the coming years. With inflation rising, further monetary tightening lies in store,” economists at Capital Economics said, but added that political risks could be headwinds.

Among stocks, Brazil’s Bovespa .BVSP slumped 1.4% to hit a three-month low. Iron ore miner Vale VALE3.SA was the biggest weight, down 1.2%, while oil major Petrobras PETR4.SA tracked crude prices lower. {O/R}

Travel operator CVC CVCB3.SA slid 6.6% after reporting a loss of 175.6 million reais ($33.43 million).

Chile’s IPSA index .SPIPSA also lost 1.3%, breaking a four-day winning streak.

In Venezuela, representatives of the government and the opposition began a round of talks on Friday in Mexico City aimed at overcoming Venezuela’s acute political and economic crisis, which has caused millions to flee the Latin American nation.

Markets in Colombia and Argentina were closed for local holidays.

Key Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF