FINANCIAL MARKETS : Telmex Selloff Batters Mexico Stock Market; Bolsa Off 126

Mexico’s key stock market index on Thursday plunged 4.8%, its fourth-steepest fall of 1994, as investors piled out of Telefonos de Mexico, the telephone monopoly also known as Telmex.

The 37-share Bolsa index plummeted 126.62 points to 2,492.32 as Telmex stock dove, responding to AT&T; Corp.’s announcement Wednesday of a $1-billion joint venture with Mexican conglomerate Grupo Industrial Alfa, to compete with Telmex in phone service.

“Telmex is Mexico’s benchmark stock,” said Claudio Brocado, head of equity research at Valores Finamex. “When its price comes down, every other Mexican stock seems more expensive.”

Volume was 86.21 million shares, with Telmex accounting for almost 57 million. Declining stocks outnumbered gainers by 70 to 11.

On the New York Stock Exchange, Telmex American depository shares tracked the stock’s fall in Mexico, sliding $4.75 to $51.25. It was the most active stock, with nearly 11 million shares trading.

On the Nasdaq market, another issue of Telmex stock plunged 28 cents to $2.53.

“Most of the selling is coming from foreigners. The (Bolsa) lost its most important support level of 2,500 and, at that point, it triggered further selling,” one trader said.

AT&T; and Grupo Alfa’s venture will rival Telmex in long-distance telephone services when the Mexican market is opened to competition in 1997. Analysts said the alliance leaves Telmex without a partner among the major long-distance telephone companies in the United States.

Traders said the market’s sharp decline was made worse by fears of further political unrest stirred by rumors of fresh attacks from Zapatista rebels in the southern state of Chiapas, site of a surprise uprising last January.