EMERGING MARKETS-Brazil stocks drop as Embraer deal disappoints

SAO PAULO, July 5 (Reuters) - Brazilian equities dropped sharply on Thursday, despite a solid day for many other regional markets, as a dramatic fall in shares of planemaker Embraer SA and widespread profit-taking dragged down the benchmark Bovespa index. All eyes were on Embraer after Boeing Co announced in the morning that it would buy a controlling stake in the Brazilian firm's commercial aircraft arm. The deal, which has been closely followed by traders since news of talks first broke in December, disappointed many by implicitly valuing Embraer's commercial unit at $4.75 billion, below analysts' expectations.

"Our initial take - lower than expected valuation for the Commercial Aviation segment but still an upside to Embraer's current price," analysts at BTG Pactual wrote in a note. Embraer shares tanked 9.9 percent in morning trade, their biggest intraday loss since July 2016, accounting for nearly a third of the Bovespa's fall. Brazil's heavily weighted banking sector also dragged on the index, with Banco Bradesco SA and Itau Unibanco Holding SA falling 2 percent and 1.9 percent, respectively. Like other sectors, banking stocks have risen significantly in recent days. "The stock market has risen for five straight sessions, without a lot of news, so there's space to take some profits," said Vitor Suzaki, an analyst at Sao Paulo-based Lerosa Investimentos. Overall, the index fell 0.5 percent in morning trade. Elsewhere in the region, Mexico's IPC equities index was the only major market also in the red, off 0.46 percent, under pressure from major stocks such as Grupo Televisa SAB and bottler Coca-Cola Femsa SAB de CV. Chile's IPSA was the major positive standout, up 0.49 percent, after the country's central bank said Chile's economic activity rose 4.9 percent in May from a year ago, well above market expectations of 4 percent.

Key Latin American stock indexes and currencies at 1422 GMT:

Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1051.95 -0.39 -8.84 MSCI LatAm 2475.21 -0.46 -12.08 Brazil Bovespa 74367.33 -0.5 -2.66 Mexico IPC 47102.11 -0.46 -4.56 Chile IPSA 5269.45 0.49 -5.30 Chile IGPA 26702.64 0.42 -4.57 Argentina MerVal 27702.88 0 -7.86 Colombia IGBC 12444.93 0.25 9.45 Currencies daily % YTD % change change

Latest

Brazil real 3.9294 -0.47 -15.68 Mexico peso 19.2925 0.82 2.11 Chile peso 656.3 -0.75 -6.35 Colombia peso 2888.9 0.53 3.22 Peru sol 3.292 -0.06 -1.67 Argentina peso 28.0800 0.07 -33.76

(interbank)

Argentina peso 28.9 0.35 -33.46

(parallel)

(Reporting by Gram Slattery and Paula Arend Laier; Editing by Dan Grebler)