EMERGING MARKETS-Latam stocks fall on U.S bank woes, China rates

* Bovespa down 2.7 pct, Mexico’s IPC drops 1.2 pct

* BTG Pactual cuts estimates for Brazilian steelmakers

* Chile’s IPSA stays positive as Cencosud gains
(Adds commentary, updates prices to afternoon)

By Caroline Stauffer and Guillermo Parra Bernal

MEXICO CITY/SAO PAULO, Oct 19 (BestGrowthStock) – Latin American
stocks extended losses on Tuesday as shares in U.S. banks fell
on renewed concern over mortgage foreclosure and a surprise
rate hike from China fueled risk aversion.

The MSCI Latin American stocks index (.MILA00000PUS: )
plummeted 3.71 percent, heading for its largest session drop
since late June.

Bank of America shares fell on Wall Street on reports the
New York Federal Reserve Bank was seeking to force the lender
to repurchase $47 billion in mortgage bonds. For details, see
[ID:nN19144677]

“Rumors in New York of Bank of America having to buy back
mortgages is hitting the Mexican market this afternoon,” a
trader at Banamex in Mexico City said.

In Mexico, the benchmark IPC index (.MXX: ) dropped sharply,
down 1.2 percent to 34,501.

Mexico sends roughly 80 percent of its exports to the
United States and is closely tied to U.S. markets.

Shares in Telecom giant America Movil (AMXL.MX: ), owned by
billionaire Carlos Slim, led losses, down 1.08 percent.

Another company owned by Slim, conglomerate Grupo Carso
(GCARSOA1.MX: ) fell 1.97 percent.

Grupo Carso on Tuesday called an extraordinary shareholders
meeting to vote on a plan to spin off its real estate and
mining units on Nov. 4. [ID:nN19137432]

Mexican miners also suffered, with Penoles (PENOLES.MX: )
down 3.3 percent and Grupo Mexico (GMEXICOB.MX: ) losing 2.67
percent.

CHINA RATE HIKE

China’s central bank said on Tuesday it was raising
benchmark rates by 25 basis points, its first rate hike in
nearly three years. [ID:nSGE69I0HU]

Investors feared the move could slow China’s rapid growth
and voracious demand for Latin America’s raw materials. Oil,
gold and base metals fell broadly. [ID:nN1914368]

Bets on forthcoming monetary easing in the United States
have driven down yields on U.S. safe-haven debt, punishing the
dollar, driving up commodities prices and fueling demand for
higher-risk assets such as Latin American equities.

“The recent rally was so strong that at some point the
market needed to take profits, and nothing better than using
China as the excuse for it,” said Marcio Macedo, who manages
about $41 million in assets at Humaita Investimentos in Sao
Paulo.

Brazil’s blue-chip Bovespa index (.BVSP: ) slid 2.7 percent,
pulled down by homebuilding and commodity shares.

Preferred shares in state oil giant Petrobras (PETR4.SA: )
lost 3.64 percent while iron ore miner Vale (VALE5.SA: ), whose
biggest customer is China, fell 2.26 percent.

Brazilian securities firm BTG Pactual on Monday cut its
estimates and price targets for the largest Brazilian
steelmakers on the back of declining prices for some products,
lower-than-expected sales volumes and higher raw material costs
throughout 2011. [ID:nN18276512]

Usiminas, the largest Brazilian maker of flat steel
products, and CSN, Brazil’s largest diversified steel group,
stand to suffer most from the market’s woes, BTG Pactual said
in a report.

Usiminas (USIM5.SA: ) lost 2.68 percent while CSN (CSNA3.SA: )
eased 1.98 percent

Chile’s blue-chip IPSA index (.IPSA: ) outperformed the
region, advancing 0.49 percent. Retailer Cencosud (CEN.SN: )
supported, jumping 3.4 percent in the wake of plans to buy
Brazilian supermarket chain Bretas for $813 million.
[ID:nN15193460]

Chile’s bank BCI also upped its price objectives for
Cencosud on Tuesday.

“We reaffirm our positive vision for Cencosud and reiterate
that it is one of our favorites in our recommended portfolio,”
BCI said in a reports.
(Additional reporting by Brad Haynes in Santiago; Editing by
Diane Craft)

EMERGING MARKETS-Latam stocks fall on U.S bank woes, China rates