LATIN AMERICAN MARKETS: Mexican Stocks Finish At Record High

By Carla Mozee

Mexican stocks finished at record highs Tuesday, with advancers led by Grupo Mexico SAB after a brokerage started coverage of the copper miner with a buy rating.

Mexico's IPC index rose 0.5% to 33,801.21, with gains led by mining, manufacturing and finance stocks. The market reached a record close in the previous session.

Grupo Mexico shares climbed 4.7% on Tuesday, their best gain since early February after UBS Pactual initiated coverage with a buy rating and a price target of 44 pesos ($3.60).

The broker cited its near-term expectations for copper prices to reach $4 a pound, and a potential spin-off of Grupo Mexico's railway assets as reasons for its view, wrote analyst Rene Kleyweg in a note Tuesday.

In Buenos Aires, the key equity index also finished at a record high. The Merval climbed 1.5% to 2,506.14, led by a 5.6% jump in shares of steel producer Siderar (ERAR.BA). Argentine assets continue to rally as positive signals emerge regarding the debt swap "of up to $20 billion in defaulted bonds," wrote emerging-market analysts at RBC Capital Markets.

Stocks in Mexico and Argentina held to higher ground as minutes from the U.S. Federal Reserve's latest rate meeting showed that a pledge by policy makers to leave interest rates low is dependent upon economic conditions, not calendar considerations.

Fed experts have informally translated the "extended period" to mean six months.

However, the "extended period" pledge will not keep policy makers from raising rates early if it appears that the economy is overheating, according to the minutes.

The minutes from the March 16 Federal Open Market Committee's meeting had a "dovish tone," according to Alan Levenson, chief economist at T. Rowe Price, in a clients' note.

This "does not sound like a group that was just a single weather-boosted employment reading from softening its commitment to the current policy stance for an extended period," he wrote. "We see that rhetorical change as substantially more likely at the June FOMC meeting than at this month's meeting."

On Wall Street, the S&P 500 Index (SPX) rose 0.2% to reach fresh 18-month highs, while the Dow Jones Industrial Average (DJI) slipped 4 points to 10,969.

Chile central bank cuts growth outlook

Elsewhere, Chile's central bank released its quarterly policy report, in which it cut its 2010 growth forecast as it considered the impact from a strong Feb. 27 earthquake. The central bank now expects growth of 4.25% to 5.25%. It has previously expected growth of 4.5% to 5.5%.

Policy makers also raised its inflation forecast for the year to 3.7% from 2.5%. The central bank said its key rate is poised to rise to 2% to 2.5%, with higher rates aimed at tamping down inflationary pressures. The key TPM rate now stands at 0.5%, a historic low.

The government has said the magnitude 8.8 earthquake caused up to $30 billion in damages.

Chile's IPSA index rose 0.7% to 3,853.75. In Brazil, the Bovespa slipped 0.3% to 71,095.65.

Back in Mexico City, UBS Pactual also put a $40 price target on Grupo Mexico's main mining unit, Southern Copper Corp. (SCCO), as it believes "the shares can trade higher on copper price momentum." Grupo Mexico's assets also include miner Asarco and railroad firm Grupo Ferroviario Mexicano.

UBS said the strong historical trading correlation of Southern Copper shares to copper prices suggests the company's shares will rally to $40 on UBS' 2010 estimated copper price of $3.80 a pound.

For Grupo Mexico, "this alone implies 33% upside," for the stock, wrote Kleyweg. "A spin-off of the railway assets and a narrowing of the holding company discount to 5% would increase upside to 50%."

NYSE-listed shares of Southern Copper closed Tuesday's session 0.6% higher at $34.49.

Copper prices were hurt by profit-taking, losing a penny, or 0.4%, to $3.6170 a pound.