Economy

Monday's rout: stock markets plunged across Latin America's main markets

Brazilian Ibovespa index plunged 12%, the biggest drop registered by a stock market benchmark.

Monday's Rout: Check out The drops in Stock Markets in Latin America. Photo: Shutterstock
Coronavirus outbreak caused panic in various exchanges. Photo: Shutterstock
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  • After Brazil, the biggest drop in Latin America was in Argentina
  • Paulo Guedes, Economy Minister of Brazil, suggests reforms
  • Asian and European Stocks suggest a market rebound this Tuesday

Monday (9) was a disastrous day for stock exchanges around the world and in Latin America’s main emerging markets it was no different. The Brazilian Ibovespa index plunged 12%, the biggest drop registered by a stock market benchmark. In Latin America, the second biggest decline was felt in Argentina.

READ ALSO: The Brazilian Central Bank’s plan to expand US dollar-denominated accounts in the country

Asian and European already show signs that world exchanges will rebound on Tuesday, but volatility remains strong and suggest a bumpy road ahead of capital markets.

See below how the main stocks in Latin America performed on the “black Monday“.

Argentina

According to Clarín, the fear of the coronavirus and the beginning of an oil dispute between Saudi Arabia, Russia and the United States were the main reasons for the Buenos Aires Stock Exchange falling 12.12% right after it opened, although it has later recovered somewhat and closed the day with a drop of 9%. Argentine companies had significant declines on Wall Street, like state-owned oil company YPF, whose shares lost more than 23% of their value. The Argentine country risk soared more than 14.7% and reached 2,768 points, the highest since 2005.

Mexico

In Mexico, the drop in its benchmark index was 6.4%. The plunge in oil prices gives yet more uncertainty to the troubled Mexican oil company Pemex, the most indebted in the world, according to El País. El Universal reckons that it was the worst day of the Mexican stock exchange in 11 years.

Colombia

According to La República, Colombia registered a 10.53% drop in the Colcap index, the most important in the country, which measures the most liquid share price variations. It had to use a circuit breaker for investors to calm their spirits.

Chile

In Chile, the decrease exceeded 4% during trading day, according to El Mostrador. The “lunes negro” as it has been called in Latin American countries, caused the IPSA to yield 3.39%, up to 4,090 points. Since 2016 there was no drop at this level.

READ ALSO: NY and São Paulo stock exchanges trigger circuit break, and dollar soars against Latin American countries currencies

Brazil

Brazil was the most affected: the fall was historic, with significant losses for Petrobras, the state-owned oil company. Ibovespa, the main stock index in Brazil, closed the day with a decrease of 12.17%, at 86,067 points. It’s the lowest level since December 2018 and the biggest daily drop since September 1998. A circuit breaker was also required. The Brazilian government’s response to panicking investors was “let’s turn crisis into reforms”. This was the phrase said by the Minister of Economy, Paulo Guedes, according to Valor Econômico. For the minister, approving the administrative and tax reforms would be a way out of the economic slowdown. With shares plunging, companies that rely on consumer spending lost BRL 99 billion ($21.2 billion) in market value. Among the 32 retail and consumer stocks, 16 fell more than the benchmark index.

Around the world

In the U.S., the circuit breaker was also needed for 15 minutes, for the first time since the 2016 elections, as Nasdaq fell 7.14%, the Dow Jones 7.8% and the S&P 500 lost 7.23%. The “Wall Street fear thermometer”, that is, the volatility index, reached the levels of the 2008 crisis.

After Brazil, the biggest drops around the globe were in Italy, highly impacted by the coronavirus outbreak, with -11.2%, followed by Argentina (-9.0%), France (-8.4%), Spain (-8.0%), Germany (-7.9%), United States (-7.8%), United Kingdom (-7.7%), Australia (-7.3%), Indonesia (-6.6%), Mexico (-6.4%), Africa (-6.3%), Turkey (-5.5%), India (-5.2%), Japan (-5.1%), South Korea (-4.2%), Russia (-3.5%) and China (-3.0%).