Venezuelan bonds rise on political upheaval, investor optimism
Regional stocks gain, Peru benefits from metal price rally
Ethiopia's bond gains after restructuring agreement announcement
Recasts with afternoon prices
By Ragini Mathur, Twesha Dikshit and Pranav Kashyap
Jan 5 (Reuters) - Latin American equities rallied on Monday, taking in stride the surge in geopolitical risk after the U.S. capture of Venezuelan President Nicolas Maduro, an episode that still drove a dash for safe-haven assets and Venezuelan bonds.
U.S. President Donald Trump said on Sunday, a day after Maduro's capture, that a second strike could follow if remaining members of the administration do not cooperate with his efforts to "fix" the country.
Venezuela's international government bonds advanced as much as 7.5 cents to almost 9 cents on the dollar, TradeWeb data showed, reflecting investor optimism.
"We continue to like the Venezuela bonds. We have been advocating going long Venezuela bonds since Feb 2024. Bonds already reflect optimism, but still have room to grind higher as swift Maduro removal and U.S. support surprised on the upside, in our view," Citi analysts said in a note.
Chilean .SPIPSA and Peruvian shares .MXNUAMPESCPGPE hit record highs, rising over 2.5% each, with the latter benefiting from rallying metal prices. Mexico's benchmark .MXX added 1.68% and Colombia's .COLCAP climbed 2.6%.
Analysts and investors said the relatively calm market reaction to Maduro's capture was because Venezuela's oil production relative to global output is small and it would take years of investment for production to catch up.
"Any impact on the global oil market is likely to be very incremental and dependent on sanctions," said Dr Mike Haigh, head of FIC & commodity research at Societe Generale.
"Whether we see production increases or further losses is not going to be impactful in the short to medium term."
VENEZUELAN SOVEREIGN BONDS WERE LAST YEAR'S BEST PERFORMERS
The country's sovereign bonds, which went into default in 2017, were last year's leading performers globally, nearly doubling in price as Trump intensified military pressure on the Maduro regime.
Both MSCI's regional equities index .MILA00000PUS jumped 2.2% while the corresponding currency gauge .MILA00000CUS gained 0.4%.
The Colombian peso COP= jumped 1% while the Mexican MXN= peso was flat, with the latter used as a proxy for LatAm risk.
Analysts said currencies of left-leaning governments throughout the region could face pressure.
Brazil's real BRL= gained 0.38%, while Chile's peso CLP= rose 0.2%.
Beyond Latin America, emerging market investors welcomed Ethiopia's announcement of a preliminary restructuring agreement with bondholders. The African nation's sole international bond gained about 2.4 cents to bid at 109.5 cents on the dollar according to Tradeweb data.
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1451.85 | 1.56 |
MSCI LatAm .MILA00000PUS | 2780.18 | 2.20 |
Brazil Bovespa .BVSP | 162125.07 | 0.99 |
Mexico IPC .MXX | 65222.12 | 1.68 |
Argentina Merval .MERV | 3113573.8 | -0.407 |
Chile IPSA .SPIPSA | 10693.66 | 2.54 |
Colombia COLCAP .COLCAP | 2123.85 | 2.65 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.4017 | 0.38 |
Mexico peso MXN= | 17.897 | -0.02 |
Chile peso CLP= | 902.58 | 0.24 |
Colombia peso COP= | 3733.28 | 1.05 |
Peru sol PEN= | 3.362 | -0.01 |
Argentina peso (interbank) ARS=RASL | 1469.5 | 0.37 |
Argentina peso (parallel) ARSB= | 1495 | 2.34 |
(Reporting by Twesha Dikshit and Pranav Kashyap in Bengaluru; editing by Barbara Lewis and Nick Zieminski)
((Twesha.Dikshit@thomsonreuters.com;pranav.kashyap@tr.com))
