LATIN AMERICAN MARKETS: Chilean Stocks Fall In Earthquake's Aftermath

By Carla Mozee

Chilean stocks dropped nearly 2% Monday, the first day of trading after a massive earthquake left hundreds dead and interrupted power supply in the world's largest copper-producing country.

Chile's IPSA index fell 1.7% to 3,761, able to pare deeper losses but still weighed by investor concerns about "a near-term hit" to economic growth, said Win Thin, senior currency strategist at Brown Brothers Harriman, in a note to clients.

The pullback arrived one session after the blue-chip index closed at its highest level ever.

Trading on the country's exchange opened at its normally scheduled time. The 8.8-magnitude earthquake hit about 230 miles south of Santiago, and about 70 miles from the city of Concepcion in the early morning hours of Feb. 27.

In the Chilean capital of Santiago, shares of market heavyweight and pulp and paper provider Copec slumped 2.9%. Stock in air carrier Lan Airlines (LFL) lost 2.1%, while shares of fertilizer maker SQM (SQM) and Banco de Chile (BCH) each gave up 1%.

But "not all [stocks]," are moving lower, said Jack Dzierwa, global strategist at U.S. Global Investors, noting that investors have snapped up shares of construction firm Salfacorp and forestry products company Masisa, as investors look for opportunities in the third most expensive market for equities among emerging markets, behind Taiwan and India

Salfacorp shares rose 4.9%, Masisa shares gained 3% and construction-services provider Besalco jumped 7.6%.

In New York, the Bank of New York Mellon's index tracking U.S.-listed shares of Chilean companies (16899W19) fell 1.1%.

Among exchange-traded funds, the iShares MSCI Chile Investable Market Index Fund (ECH) fell 1.7%.

Meanwhile, the country's currency rose against the U.S. dollar as copper prices surged, lifted after some mining operations in Chile were halted because of the earthquake. Copper prices had been up more than 6%, but recently rose as much 2.1% to $3.35 a pound.

The currency recently traded at 523.25 pesos per greenback, compared with Friday's close at 529.80 pesos.

Chilean mining giant Corporacion Nacional del Cobre de Chile -- better known as Codelco -- said it will use plants in northern Chile to make up for the disruptions. The bulk of mining activity is conducted in the northern part of the Andean nation, away from the center-south portion of the country.

Codelco is not publicly listed.

The peso is poised to post further gains, wrote Thin, in part because the government is likely to tap savings from a fund to pay for reconstruction efforts. The funds are kept in dollars, and will be needed to be converted into pesos for rebuilding efforts.

"Furthermore, the price of copper has moved higher after the earthquake on supply concerns, which should act as a positive terms of trade effect that boosts the peso exchange rate," he wrote.