EMERGING MARKETS-Latin American stocks post 12 pct gain in 2010

* Brazil seen stronger in 2011 after lagging this year

* Analysts see Mexico getting too pricey

By Michael O’Boyle

MEXICO CITY, Dec 31 (BestGrowthStock) – Mexican stocks rose to a
record high on Friday as investors bet improving growth in the
United States will support local exports, capping a strong year
for most of the region’s markets.

Gains in Mexico, the only major Latin American market open
on Friday, lifted the MSCI Latin American stocks index
(.MILA00000PUS: ) 0.3 percent, on track for its fourth straight
session of gains.

The MSCI index is set to post a 12 percent gain in 2010.
Analysts expect U.S. factory survey data due next week could
back views that the American economy is growing faster than
expected and give Latin American markets a good start to 2011.

“The expectations are growing that stronger U.S. growth
will help us as well, There is a lot of optimism about 2011,”
said Carlos Alonso, a trader at brokerage Interacciones in
Mexico City.

Mexico’s IPC index (.MXX: ) rose 0.4 percent, lifted by a
2.25 percent gain in miner Penoles (PENOLES.MX: ). The IPC has
jumped about 19.5 percent during 2010 and been consistently
hitting record highs since September.

Latin America’s smaller markets in Chile, Argentina and
Peru outpaced gains of both Brazil and Mexico in 2010, with
Peru jumping 64 percent as record metals prices lifted mining
shares. For details, see [ID:nN30121815]

Brazil’s Bovespa edged up only 1 percent in 2010, hampered
by uncertainty about Brazil’s presidential election and
dilution from the world’s biggest public offering by state-run
oil firm Petrobras. But with those concerns gone, fund managers
say Brazil could perform better in the new year.

BRAZIL GROWTH, MEXICO JITTERS

William Landers, a fund manager at BlackRock in New York,
noted that Brazil’s Bovespa (,BVSP: ) is trading at 10.5 times
2011 earnings estimates. Mexico, by comparison, is trading at
around 14 times next year’s earnings.

“Brazil is one of the cheapest markets in the world, which
I do not think is warranted anymore, given that the country was
able to prove itself through the tough times in 2008 and early
2009,” said Landers. He manages 10.5 billion in Latin American
stocks and recently picked up more shares of Brazilian
homebuilders and banks.

Francisco Cataldo, retail strategist at brokerage Agora,
expects the Bovespa to gain 24 percent in 2011 as rising wages
support shares linked to domestic consumer demand.

“Despite the fact that we expect slower growth for the
economy, companies with greater exposure to the domestic
economy are still our favorite,” Cataldo said.

But some analysts and investors are getting worried that
low interest rates in major economies like the U.S. are driving
investors to bid up emerging market assets beyond their
fundamental growth prospects.

Mexican and Colombian stocks are trading at record highs
despite a U.S. recovery that is middling at best, with
unemployment still high. The U.S. is the top trading partner
for the two nations,

There was a scramble this week from some investors to
protect their positions in a fund that tracks Mexican equities
in case of a correction in January.

Frederic Ruffy, options strategist at New York-based
website WhatsTrading.com, said volume in bearish bets on a
popular Mexican exchange-traded fund spiked Tuesday to what he
believed was the highest level since March 2009.

The price of iShares MSCI Mexico Index fund (EWW.P: ) has
rallied 27 percent since September as investors bet U.S.
stimulus plans would lift Mexico’s economy.

After the sharp gains, put option contracts that pay off if
the ETF falls more than 10 percent by a Jan. 21 expiration date
were among the most popular this week.

“People who have a major investment in Mexican equity
positions are initiating hedges against their long holdings to
avoid major downside losses,” said TD Ameritrade chief
derivatives strategist Joe Kinahan.

About 34,000 EWW puts and 3,669 calls traded on Tuesday,
about 3.6 times the combined average daily volume, according to
New York-based options analytics firm Trade Alert.

“This confirms my view that the Mexican market has gotten
too expensive,” said Interacciones’ Alonso. “I am worried we
could see a correction because prices have been inflated by all
this global liquidity.”

Still, despite the risk of a correction, Interacciones
still expects he IPC to gain 12 percent in 2011.
(Additional reporting by Doris Frankel in Chicago and Elzio
Barreto in Sao Paulo; editing by Jeffrey Benkoe)

EMERGING MARKETS-Latin American stocks post 12 pct gain in 2010