Emerging markets trade mixed; investors wait on U.S. bailout vote; new strikes planned in Argentina

By Aaron Hochman-Zimmerman

New York, Oct. 1 - Emerging markets traded mixed on Wednesday amid another day of light holiday volumes.

"We're waiting for the Senate," a syndicate official said. "That's the big ball right there."

Whether or not headway is made "it's pretty much going to decide the tone" for Thursday, he said.

Still, regardless of which day the U.S. government bailout plan passes, "they're going to do something," he said.

In trading, Argentina was wider again as news of the debt restructuring gave way to the prospect of new farm strikes beginning on Friday.

The primary also saw a flicker of interest in Brazil's utility Sabesp, which is sitting on a 300 million real deal.

Meanwhile in the broader market, volatility jumped in the morning but settled back down to end higher by only 0.42 at 39.81, according to the VIX index. The index is a frequently used gauge of market volatility.

LatAm waits on bailout

"It's been one of those blah days," a syndicate desk official said as the world waited on the U.S. Senate to vote on the bailout package.

Meanwhile in Argentina, bonds had seen mild success on Tuesday, but any gains were given up on Wednesday after farm leaders announced a new round of strikes and demonstrations.

The farmers claim that the government was unresponsive to their demands and they will cease livestock and grain sales for six days beginning Friday, the Buenos Aires Herald reported.

Exceptions will be granted for ranchers whose cattle are subject to the ongoing drought.

"Things are a mess," a syndicate official said.

The 8.28% Argentine discount bonds due 2033 were spotted at 53.75 bid.

In Mexico, remittances from workers in the United States fell by 12% in August, compared to August 2007.

Nearly $15.5 billion has been sent to Mexico in the first eight months of the year, compared to $17.7 billion during the same period of 2007, according to a statement from the central bank.

The declining U.S. economy and the devaluation of the dollar were blamed for the lower remittance totals.

The lack of a steady flow of remittances in the economy may begin to take a toll, a syndicate official said.

"Then you've got a problem from the bottom up," he added.

The peso was seen trading at 10.945 to the dollar.

The Mexican sovereigns due 2017 traded at 98.2 bid.

Also in Latin America, Venezuela's 9¼% bonds due 2027 were seen at 74.25 bid, while Brazil's highly traded 11% bonds due 2040 were quoted at 125.9 bid.

Sabesp offers 300 million real debentures

Brazil's Companhia de Saneamento Basico do Estado de Sao Paulo plans to offer 300 million real debentures through BB Investments, Caixa Economica Federal, Citigroup and HSBC.

The deal is part of a $3 billion debt program and is expected in five- and seven-year tranches.

Sabesp is a Sao Paulo-based utility.

"This actually has a chance of getting done," a syndicate official said.

Still, this type of deal behaves more like a bank deal, a strategist said, adding that it is not on everyone's radar.

Emerging Europe mixed

Emerging Europe saw some successes but was mixed overall as sentiment could not quite match the rebound atmosphere on Tuesday.

In Russia, the lower house of parliament was scheduled to meet with finance minister Alexei Kudrin and central bank chief Sergei Ignatyev, according to the Itar-Tass News Agency.

The duma will be briefed on monetary reserves of the central bank, the stabilization fund and the sovereign wealth fund before a vote on consumer rights and contract law.

Also, Russia announced it will allow about 200 E.U. observers into a buffer zone around South Ossetia.

The observers' mission will be to monitor the Russian pullout after its invasion of Georgia.

Russia had barred the European Union from the region, citing safety concerns, until a recent deal was struck with French president Nicolas Sarkozy.

The Russian government bonds due 2030 jumped 1.1 points to 102.6 bid.

In Turkey, the ruling AK Party and its deputy prime minister Cemil Cicek are monitoring the world's financial condition, the Anatolian News Agency reported.

"For a long time, there has been a program of stability implemented in the Turkish economy and fiscal discipline in order to strengthen the economy against global shocks," Cicek said in the report.

"Naturally, the global developments may have an impact on Turkey. We are closely monitoring the situation. If there is a need for a precautionary measure, we will take it," he added.

The Turkish sovereign bonds due 2030 slipped 1.25 points to 143.25 bid.

Philippine peso drops

In the Philippines, the peso continued to suffer through increasing risk aversion in the market as the world waited for the bailout package from Washington, D.C.

A rejection of the bailout is cause for worry over the health of the merchandise trade, said central bank deputy governor Nestor Espenilla, according to the Manila Times.

If it is not passed "there will be a long-term impact not just [for the Philippines], but on the world. That's where our concern would be in terms of sustained impact," Espenilla said in the report.

The peso was seen trading at 65.64 to the dollar.

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