Latin America stocks rose by the most in nearly a year Monday as global equity markets rallied after their recent rout and steep mutual fund outflows from Brazil and Mexico pushed investors to snap up bargains.
The MSCI Latin America stock index climbed 2.83 percent as stocks extended gains from last week that pulled the gauge off its lowest point in more than a year.
Monday's jump was the biggest one-day percentage rise since last Sept. 1.
Latin American stocks had been battered along with global equities since late July on fears of another recession in the United States as well as concerns that Europe's debt crisis could drag down the economies of Italy and Spain.
The drop has been so big that some investors bet the panic has gone too far.
"The outflows have been so extreme that it is a sign of opportunities. Prices have hit attractive levels for the medium- and long-term investor," said Jaime Aguilera, a strategist at HSBC in Mexico City.
The 4-week moving average of outflows from U.S.-based mutual funds investing in Latin America hit its highest since May 2010 in the week ended Aug. 10, according to data from Lipper, a Thomson Reuters company.
Still, Will Landers, who manages $8.5 billion in Latin American stocks at BlackRock, said it will take more time for the market to work through its current pessimism.
"The market needs to settle down. Maybe last Friday was the bottom, who the heck knows," Landers said, adding that the slump has uncovered value in Latin American stocks, especially those tied to domestic growth rather than the global economy.
"Latin American stocks stand out as a region that sold off more than it should have," Landers said.
Latin America's economies, especially Brazil, Chile and Peru, are growing at a much faster pace than the United States and Europe and do not share the same debt problems.
U.S. stocks brushed off data that showed U.S. manufacturing in New York State contracted for the third month in a row.
Some investors eyed a scheduled meeting Tuesday of French and German leaders that could ease concerns about the euro zone debt crisis.
Brazil's Bovespa stock index rose 2.2 percent as phone company Telesp added 6.22 percent, state-run oil giant Petrobras added 3.4 percent and Vale , the world's top iron ore miner, rose 1.83 percent.
Latin American stocks as well as global stocks have seen a wild ride in the last two weeks.
The Bovespa has surged 12.3 percent in the last five sessions from its lowest level in more than two years after slumping nearly 17 percent in the previous six sessions.
"The market's going to continue like this, dropping a lot, rising a lot," said Daniel Marques, an equity analyst with Agora in Sao Paulo. "We're going to have to get used to this for awhile."
Demand for Brazilian stocks has also been hurt by fears inflation will eat into economic expansion. A weekly poll showed economists trimmed their forecast for Brazil's annual inflation rate this year.
Mexico's IPC index added 1.62 percent and Cemex , the top U.S. cement supplier, gained 7.1 percent, extending last week's rebound off a more than two-year low.
Sharp losses in the Mexican peso have made local assets more attractive, analysts said. New rules allowing local pension funds to invest more in stocks are also supporting Mexican stocks. HSBC's Aguilera noted the new rules meant local funds could invest about $14.5 billion more in stocks.
But fears about another potential recession in the United States, Mexico's top trading partner, could limit further gains, Landers warned.
Chile's IPSA index rose 0.89 percent as SQM , the producer of fertilizer, lithium and iodine, gained 2.32 percent, and retailer Falabella rose 1.44 percent.
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