Bolsa Plunges 6% on Fears Uprising Could Spread

Mexican stock prices recorded the biggest one-day drop in more than four years Monday, plunging more than 160 points as an outbreak of car bombings in Mexico City this past weekend sparked concern that the unrest in southern Mexico may be spreading, analysts said.

The Bolsa index fell 165.92 points or 6.32% to 2,459.11. It was the biggest percentage drop in one day since Oct. 16, 1989, when the market dropped 8.05%.

“It is uncertainty and nervousness over Chiapas. There is support at 2,450, although in a state of fear it doesn’t respect support levels,” said Jorge Gonzalez of CBI brokers.

The drop came on the 10th day of an insurgency by armed rebels in Chiapas, who declared war on the Mexican government and briefly seized six cities on New Year’s Day. The rebels, who call themselves the Zapatista National Liberation Army and are fighting for indigenous rights, have vowed to spread the uprising to Mexico City.

Near Mexico City, an electric tower was bombed Sunday afternoon.

In addition, four bombs exploded Saturday in and around the capital, injuring one woman, and one blast shook Acapulco.

Rogelio Ramirez de la O, director general of Ecanal, said the Mexican market is unlikely to be viewed as a buying opportunity until the situation has been resolved.

Some market experts said funds that entered the market last month are facing huge losses.

Robert Gay, head of emerging markets research at Bankers Trust, said the stock drop should be viewed in the context of the steep rise in the final months of 1993 after Congress approved the North American Free Trade Agreement.

“It took off. It was re-rated almost overnight. Whenever there are unsettling events in a raging bull market, there are always corrections,” he said.

Gay said if the market falls to 2,300 or 2,400, “it would be irresistible at those levels” if there were good prospects the violence was coming to a resolution.