By Karin Strohecker and Rodrigo Campos LONDON, Nov 17 (Reuters) - The outcome of the first-round vote in Chile's presidential election should be positive for the peso, stocks and bonds, analysts said on Monday, expecting this could potentially pave the way for more market-friendly initiatives. Following the vote on Sunday, far-right candidate Jose Antonio Kast is favoured to clinch victory in the runoff on December 14 despite lagging slightly behind governing coalition candidate Jeannette Jara. The combined vote share of all right-leaning candidates surpassing 50% made it likely Kast would consolidate votes in the second round, positioning him for a decisive victory, said Thierry Larose, portfolio manager at Vontobel. "This outcome is seen as moderately bullish for Chilean assets," Larose said in emailed comments. "A likely Kast presidency, combined with a right-leaning but fragmented Congress, is expected to support local assets such as Chilean bonds and the peso." Chile's peso has some catching up to do, having strengthened just over 7% since the start of the year against a dollar that has softened 9% against currencies of major U.S. trading partners. Chile's peso has also underperformed regional peers from Brazil to Colombia or Mexico, whose currencies have strengthened 14% or more since the start of the year. Law-and-order issues and immigration have dominated Chile's electoral agenda, marking a sea change from the wave of left-wing optimism and hopes of drafting a new constitution that brought current President Gabriel Boric to power. Boric isn't allowed to run for reelection. The runoff pits two ideological extremes against each other. An eventual win for Kast would put in place an administration further to the right than any other since the Pinochet dictatorship. Diego Celedon at JPMorgan pointed to a stronger showing overall for the right-wing lists. "This lowers the execution risk of some of the pro-market initiatives presented by the right-wing candidate (in case he wins the second round), which in our view generates support for equities," Celedon said. MSCI's Chile equity benchmark has risen more than 46% since the start of the year, beating a near-29% rally in the broader MSCI emerging market equity index. <.MICL00000PUS> <.MSCIEF> "For markets, a Kast victory offers the prospects of fiscal consolidation and a renewed focus on attracting much-needed investments and boosting Chile's lacklustre growth," said Nafez Zouk, EM sovereign debt analyst at Aviva Investors. "Markets should find comfort in the fact that the political landscape should permit a move towards more centrist macro policy-making, with the debate amongst the candidates having been about how much, not whether, to consolidate fiscal accounts." (Reporting by Karin Strohecker and Rodrigo Campos; Editing by Hugh Lawson) ((karin.strohecker@thomsonreuters.com; Reuters Messaging: karin.strohecker.reuters.com@reuters.net)) Keywords: CHILE ELECTION/MARKETS
