* Chile's peso worst performer
* Chinese USD property bonds sink
* Brazil's real extends losses from worst session in a month
By Ambar Warrick
Oct 5 (Reuters) - Latin American currencies fell on Tuesday
as a rise in U.S. Treasury yields pressured high-yielding
assets, while dollar bonds of Chinese property firms plummeted
on deepening concerns over widespread defaults.
Chile's peso slipped 0.6% to the dollar, tracking a
decline in copper prices as concerns over Chinese demand
weighed. The currency as the top decliner in Latin America
(Latam).
Dollar-denominated bonds of mid-sized Chinese property
developers slumped as concerns over a default drove a slew of
ratings downgrades, while focus also remained on China
Evergrande as it struggles to clear its massive $300 billion
debt pile.
Concerns over the property sector, which accounts for about
a quarter of China's gross domestic product, have also rattled
Latam markets given the region's heavy dependence on China, as
an export destination.
Brazil's real fell 0.4% after marking its
worst day in more than a month on Monday, as concerns over
political instability compounded weak trends in markets.
Data on Tuesday showed Brazilian industrial output fell more
than expected, hurt especially by weak manufacturing of durable
consumer goods as Latin America's largest economy struggles to
recover from the COVID-19 pandemic.
A global semiconductor shortage has also stalled production
in the country's massive automobile sector.
"Going forward, the industrial sector is likely to be
impacted by tighter financial conditions, lingering supply chain
frictions, significantly higher logistical and energy and other
input costs, and potentially also energy supply restrictions,"
Goldman Sachs analysts wrote in a note.
Broader Latam and emerging market currencies fell as a rise
in U.S. Treasury yields narrowed the gap between risky and
risk-free debt. Yields have been boosted since mid-September
after the Federal Reserve affirmed plans to eventually trim
monetary policy.
Sentiment towards emerging market currencies was also dented
on Monday after JPMorgan turned "underweight" on the sector.
Mexico's peso fell 0.5%. Central Bank Deputy Governor
Jonathan Heath said the bank would likely hike rates one or two
more times as it races to contain a recent spike in inflation.
A rate hike earlier this year had supported the peso, given
that higher interest rates make the currency an attractive
destination for carry trade.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1236.42 0
MSCI LatAm 2212.97 -0.01
Brazil Bovespa 110488.40 0.09
Mexico IPC 50890.92 0.06
Chile IPSA 4270.86 0.67
Argentina MerVal - -
Colombia COLCAP 1389.44 0.56 Currencies Latest Daily % change
Brazil real 5.4643 -0.36
Mexico peso 20.5742 -0.46
Chile peso 810.47 -0.60
Colombia peso 3796.75 -0.24
Peru sol 4.13 0.02
Argentina peso 98.8900 -0.03
(interbank)
(Reporting by Ambar Warrick
Editing by Marguerita Choy)
