Colombia Peso Declines to Four-Week Low on Credit Quality Worry

elk says on Jul 26, 2007, 15:07:

Colombia Peso Weakens Sharply On Risk Aversion; Stocks Down

Thu, Jul 26 2007, 18:46 GMT
http://www.djnewswires.com/eu

Colombia Peso Weakens Sharply On Risk Aversion; Stocks Down

By Diana Delgado

OF DOW JONES NEWSWIRES

BOGOTA (Dow Jones)--Colombia's peso weakened 2% in Thursday's session amid mounting concerns over the subprime mortgage portfolio in the U.S. and higher crude oil prices.

The peso closed at COP1,989.89 to the dollar from the COP1,951.00 closing mark on Wednesday amid a heavily traded session. A total of $1.06 billion changed hands during Thursday's foreign exchange market, one of the highest volume days so far this year.

Alexander Cardenas, head of research at local brokerage Acciones y Valores, said the country's largest banks and foreign funds sold Colombian stocks and local treasury notes, known as TES, to purchase dollars.

U.S. subprime concerns, weak homebuilder earnings and sharply higher crude oil prices generated risk aversion among investors toward emerging markets such as Colombia.

"Everyone bought dollars today. We haven't seen such volatility in months," Cardenas said.

The Colombian peso hit its weakest level at the opening of the session at COP1,996.

U.S. sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000 in June, the Commerce Department said Thursday. Also, the median price of new homes fell by 2.2% to $237,900. The data were worse than expected, even though investor expectations for the housing situation were already fairly low.

In addition, lower-than-expected net profits from U.S. home builders added more pressure on global markets, Cardenas said, citing the results of D.R. Horton (DHI), whose stock price was recently down 4.5%.

The trajectory of the Colombian peso for the coming sessions will depend on the central bank's decision to hike its benchmark interest rate.

The peso may appreciate if Colombia's monetary authority decides at its Friday meeting to raise its interest rate to 9.25% from the current 9.0%, Cardenas said.

Analysts are divided on what the bank may decide.

Higher rates in Colombia will lure foreign portfolio investment attracted by higher rates compared with U.S. rates.

In the local equity market, the IGBC fell 1.3% to 11,060.74 points.

Daniel Escobar, head of research at local brokerage Gesvalores, said the Colombian equity market didn't retreat as sharply as other markets in the region because companies began reported good financial results.

On Thursday, Cementos Argos (CEMARGOS.BO), Colombia's largest cement company, said its net profit in the first half of the year increased 79% to COP91.83 billion ($46.5 million) from COP51.22 billion in the same period last year, according to a filing sent to the country's securities regulator.

The cement's holding, Inversiones Argos SA (ARGOS.BO), said its net profit in the first half of the year rose 35% from a year earlier to COP79 billion ($40.5 million).

In Thursday's equity market, shares of steel company Acerias Paz del Rio (PAZRIO.BO) were the biggest losers; Paz del Rio fell 3.5% to COP82.50.

Suramericana de Inversiones (SURAMINV.BO) fell 0.9% to COP19,720.

On the debt market, the yield on the benchmark peso denominated TES maturing in 2020 ended at 9.9% from 9.815% on Wednesday.

-By Diana Delgado, Dow Jones Newswires; 571-6001980; diana.delgado at dowjones.com

(END) Dow Jones Newswires

July 26, 2007 14:46 ET (18:46 GMT)

goin_south says on Jul 26, 2007, 16:27:

where are all the "I Told You So" s that were saying the peso was 'goin_south' (in reality,....risin_up) on down to about that 1500 level and below, jus a few weeks or a month ago?

2500 and more, por favor!
Vida por los gringos!

why can't the freakin Chung King Chinese just LEAVE THE FREAKN DOLLY LLAMA and Tibet ... ALONE!

JohnNewYork says on Jul 26, 2007, 16:37:

3000 and more. por favor!

bueno_pues says on Jul 26, 2007, 16:57:

Going South, va a ser mucho menos en futuro por que el US dolar es muy debil y much mas debil en futuro. Yo lo dije, 2000 pesos anterior y yo digo 1500 en futuro.

BAQ says on Jul 26, 2007, 17:53:

DIE PESO DIE !!! CRASH DIVE!! CRASH DIVE!! BURN BABY BURN, POUR ON THE GASOLINE !!!!!!!!!!!

jajajajajaja

Semper Fidelis !

Rubito says on Jul 26, 2007, 18:06:

We really don't want it to move too much or too quickly in either direction.

---Violence is the price of freedom.---

panthdave says on Jul 26, 2007, 18:38:

I stopped watch the Peso was giving me a headache just go with the flow....


Peace Out..

panthdave Miami

goin_south says on Jul 26, 2007, 21:52:

**We really don't want it to move too much or too quickly in either direction.**

Very compassionate, Rubito. I (WE!) didn't know you had it within ya. ;)

why can't the freakin Chung King Chinese just LEAVE THE FREAKN DOLLY LLAMA and Tibet ... ALONE!

Brians says on Jul 27, 2007, 04:45:

The death of worldwide liquidity will create problems for all assets. The Colombian Peso is only one such investment that is vulnerable. I have said all along that this is the real reason for the rise. This is the third time this year we have seen these fears surface and the Peso reacted the same each time. The vulnerability of the Yen Carry trade effects too many things to list. Right now it is only a perception but if the dollar continues to strengthen against the Yen this will get ugly quick. The next couple of days will tell us a lot. Anyway I have been negative on the Peso since 2,200 to the dollar. I looked correct a few times and so far have been very wrong. However as GIB says time will tell. Credit created from credit always ends poorly and there will be a move to higher quality assets. This is not Colombia and thus we will see weakness in the Peso. I still love Colombia longer term but fundamentals are not there yet. Emerging Markets are always vulnerable to large corrections. Is this one? We'll see.

Miamigo says on Jul 27, 2007, 05:03:

The only good thing about the peso hovering around 2000 is that it's easy to figure the dollar conversion in your head, just drop the last three zeros and divide by 2.

Gator says on Jul 27, 2007, 08:44:

I no longer think in dollars (unless we are in the USA and even then I mentally find myself sometime converting to pesos.). Took a while like getting use to the metric system.

"Brevior Sltare Cum Deformibus Mulieribus Est Vita!" .

BAQ says on Jul 27, 2007, 09:24:

Itis beyond me trying to understand why the world thinks all of a sudden Colombia is so great. Dont get me wrong, I like Colombia, Ilive here, I retired here but I have not seen ANY improvement in a drop in crime, the country´s inferstructure is still a mess, corruption is still the norm, unemployment is still high, there are still no social services for the poor, most jobs pay very low, colombia has no oil reserves so to speak, prices here are climbing ie 9030 pesos for a gallon of gas, building costs are rising beyone the point of being funny and FINALLY, we have a mad man named Hugo Chavez sitting next door who is building his military strength that is startingto become scarry ect ect ect so do investors think Colombia is the hot ticket.

Just doesnt add up

Semper Fidelis !

Gator says on Jul 27, 2007, 14:56:

Other than that, what's the problem???

"Brevior Sltare Cum Deformibus Mulieribus Est Vita!" .

panthdave says on Jul 27, 2007, 15:23:

So the Euro weakened and the Peso Weakened...HMMMMMMMMMMMMM.......Lets give it a weeks time....Now this happened yesterday when the Stock Market Plunged..HMMMMMMMM

Gringo you scare me...

Gator I see no other problems..Its Perfect..

panthdave Miami

Man Tequila says on Jul 27, 2007, 21:34:

4 week maxima/minima? Means nothing to me.

pues se me antoja que sus cantares son de una tierra desconocida, y yo le dije si a usted le inspira, saber la tierra de donde soy... con mucho gusto y a mucho honor...

fecherklyn says on Jul 28, 2007, 17:49:

BAQ & Brians, I liked both your analysis's.

Generally accepted economic theory suggests the interest in developping country currencies wanes once global economic worries come to the fore. If you follow this logic, the peso should weaken against ALL industrialised nation's currencies as thet rush back to the "safety" of what they know best (Zero currency risk in their own currency).

BUT.

The above economic lore was really woven before today's excesses of liquidity. Nowadays, all this liquidity is desperately searching for "better return" and I wonder if the return to a safe refuge in times of economic uncertainty still holds from a practical point of view. This week a number of Colombian companies have reported earnings increases at rates which must make USA and European companies salivate. So has the interest in Colombia as an investment opportunity really diminished? I will wait and see, especially as the peso has been one of the strongest currencies in the world thid last couple of years....and investors with excessive liquidity do not forget such factors easily.

Having said this, I must admit I do not know how the peso's relative strength will lie. I just wanted to state that accepted economic theories also have to change, like all other things in life.

lpdiver says on Jul 28, 2007, 18:25:

I hear you on the peso/dollar thing Gator. I blew my mind to see meat at $25 per pound when I first traveled to Aruba. Then realization that a "dollar" was actually a flourin and that a "pound" was actually a kilo. So it was actually about $6.47 per pound.

The question of whether it was cow or horse never arose...

My daughter is real good at math from living there.

t

"cook some rice!"