SAO PAULO, Aug 22 (Reuters) - Brazilian stocks on Tuesday shot to a six-year high after the government unveiled plans to privatize power utility Centrais Elétricas Brasileiras SA, spurring demand for state-run firms. The benchmark Bovespa stock index rose 2.3 percent, breaching the 70,000 threshold for the first time since January 2011. Common shares in Eletrobras, as the power utility is known, rose as much as 40 percent in their biggest daily advance since 1993. Late on Monday, Brazil floated a proposal to cede control of the country's biggest power utility, the boldest privatization yet amid a string of public asset sales and infrastructure concessions. The deal could fetch up to 20 billion reais ($6.4 billion), an official said. Analysts at Itaú BBA estimated the privatization could generate "at least 40 billion reais" in value through cost-cutting, asset sales and other optimization efforts. Still, the transaction will face sharp political opposition, they said. The share move tightened the spread of preferred shares over common shares to the smallest in a month as traders anticipated higher dividend payouts after privatization. Shares of other state-controlled companies also rose, with those holding Eletrobras debt leading the upswing. Shares of lender Banco do Brasil SA rose 4.2 percent, while oil company Petróleo Brasileiro SA jumped 3.6 percent. "The transaction is good news for state-owned firms as a whole. In particular, expectations of better management and incoming funds (at Eletrobras) are good news for Banco do Brasil," Lerosa Investimentos equity analyst Vitor Suzaki said. Brazil's stock market led the gains in Latin America, with all regional benchmark indexes trading up. The Brazilian currency also strengthened as investors hoped proceeds from the transaction could help the government to meet its fiscal targets. Most Latin American currencies firmed, tracking a rally in metal prices ahead of a meeting of central bankers in Jackson Hole, Wyoming, later this week. The Mexican peso was up for a third straight day, while the Chilean peso touched a new six-month high. Federal Reserve Chair Janet Yellen on Friday is expected to provide further clues on the Fed's plan to roll back the extraordinary stimulus it introduced to fight the global financial crisis, removing a key driver of demand for emerging market assets.
Key Latin American stock indexes and currencies at 1500 GMT:
Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1072.34 0.82 23.36 MSCI LatAm 2862.05 1.33 20.67 Brazil Bovespa 70218.55 2.31 16.59 Mexico S&P/BVM IPC 51325.65 0.16 12.45 Chile IPSA 5108.75 0.14 23.06 Chile IGPA 25536.27 0.16 23.16 Argentina MerVal 23010.43 0.19 36.01 Colombia IGBC 10968.72 0.34 8.30 Venezuela IBC 196808.75 0.45 520.75 Currencies daily % YTD %
change change Latest
Brazil real 3.1498 0.57 3.16 Mexico peso 17.6175 0.21 17.75 Chile peso 641.2 0.23 4.60 Colombia peso 2984.56 -0.05 0.57 Peru sol 3.238 0.03 5.44 Argentina peso (interbank) 17.2000 0.41 -7.70 Argentina peso (parallel) 18.22 0.44 -7.68
(Reporting by Bruno Federowski; Editing by Andrea Ricci)