EMERGING MARKETS-Chilean assets drop after election rally; Brazil and Argentinian equities gain

By Niket Nishant and Twesha Dikshit

Dec 15 (Reuters) - Chilean assets took a breather, with investors booking profits following last week's sharp rally in the lead-up to the presidential run-off, while Brazil and Argentina led regional equites gains.

The stocks benchmark in Chile .SPIPSA lost almost 1% on Monday after gaining 1.7% last week while the peso CLP= weakened 0.6% against the greenback.

The pullback suggests markets may have priced in much of the good news, leaving Chilean assets sensitive to how post-election reforms and fiscal plans unfold after Jose Antonio Kast's victory.

"Historically, Chile has had very strong credit overall with a strong and long track record of fiscal prudence and economic management of high quality, but the last administration put a little bit of a question mark around all of that. So now our expectation is that we will return to this traditional market perception," said Petar Atanasov, co-head of sovereign research & strategy at Gramercy.

The MSCI index that tracks overall Latin American equities .MILA00000PUS added 0.1% while a gauge of regional currencies .MILA00000CUS was little changed.

DIVERGENCE ACROSS REGIONAL ASSETS

Brazilian stocks .BVSP added 1% and were on track for a fourth straight day of gains.

The IBC-Br economic activity index, a proxy for gross domestic product, fell more than expected in October.

Any weakness could boost the case for interest rate cuts by the central bank after it held rates for a fourth consecutive meeting last week and stuck to its hawkish stance.

Argentina's MerVal index .MERV gained 1.2% while the peso ARS= firmed 0.2% against the dollar. A Reuters poll of analysts showed expectations that the economy grew 3.5% year-on-year in the third quarter of 2025, rebounding from a 1.9% contraction a year earlier.

Separately, the Argentinian central bank said it would adjust the foreign exchange rate band on a monthly basis based on the latest inflation reading under a new monetary framework.

The Mexican peso MXN= was up 0.2% against the dollar. Private sector analysts polled by Mexico's central bank expect the currency to close the year stronger than their previous estimate.

"Mexico is well-positioned for a modest rebound in 2026, with low effective tariff rates and potential for further central bank easing," Vanguard analysts wrote in a note.

The country also opened an anti-dumping and anti-subsidy investigation into U.S. pork leg and shoulder imports after domestic producers alleged unfair pricing. Stocks .MXX down 0.4%.

Colombia's benchmark index .COLCAP dipped 0.7% while the peso COP= fell 0.4%.

Key Latin American stock indexes and currencies at 20:02 GMT: