LONDON, Sept 5 (Reuters) - Chile's stock market staged a
strong rally before paring gains at the close on Monday, a day
after Chileans rejected a proposed new constitution, while the
top copper-producing nation's peso firmed as its government
prepares to draft a likely more moderate text.
Chileans voted overwhelmingly on Sunday to reject what would
have been one of the world's most progressive charters and a
sharp shift from its market-friendly constitution dating back to
the Augusto Pinochet dictatorship.
The local stock market rose more than 6% to an all-time
intraday high of over 6,000 points, but finished up 2.16%, just
shy of 5,800 points, with strong gains in the shares of LATAM
Airlines, retailer Cencosud and
ferromining company CAP.
Chile's peso rose more than 4% against the dollar as local
markets opened to touch 838.20, a level last seen on June
10, Refinitiv pricing data showed, but it closed up 0.23% at
"The outcome may force a more moderate and gradual reform
impulse," said JPMorgan's Diego Pereira in a note to clients,
adding that he expected positive market momentum, thanks to less
uncertainty and lower risk premiums ahead.
"We believe both real and financial investors would prefer
that if the current constitution has to be reformed, it's done
by the Congress or a committee of notables."
Shares of London-listed miner Antofagasta rose 3.4%
on Monday, outpacing gains in the STOXX Basic Resources Index
, which was up 1%.
Chile is home to global copper giants including Codelco, BHP
, Anglo American and Glencore as well
Chile's peso has fallen some 3% since the start of
the year, making it an outlier in the Latin America region,
where currencies from Brazil's real and Peru's sol
to Mexico's peso have chalked up solid gains in 2022.
The referendum was also seen as an evaluation of the
government, which is struggling with buoyant inflation, an
economic slowdown and an internal security crisis, according to
Experts say financial markets' initial gains may not last as
constitutional uncertainty remains a concern.
"As uncertainty hovers over the country, capital flows could
slow and ratings downgrades should materialize," said Brendan
McKenna, a strategist at Wells Fargo.
"As those dynamics unfold, the Chilean peso should weaken
over the longer term, ultimately getting up towards all-time
lows against the dollar."
Chile's central bank is expected to raise the benchmark
interest rate again this week in the face of persistent
After acknowledging defeat, President Gabriel Boric pledged
to make adjustments in his government team and work with
Congress to draft a new text. Center-left and right-wing parties
have also agreed to negotiate.
(Reporting by Karin Strohecker in London, Alexander Villegas in
Santiago and Devik Jain in Bangalore;
Writing by Valentine Hilaire and Sarah Morland; Editing by
Matthew Lewis, Andrea Ricci and Richard Chang)