Brazil Stocks Drop as Builders Decline on Interest Rate Concerns
March 8 (Bloomberg) — Brazil’s Bovespa stock index fell from a six-week high, led by homebuilders and retailers, on concern the central bank will boost interest rates as soon as next week.
Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s top real-estate developer, fell more than 2 percent as economists raised their 2010 inflation forecast for a seventh week, boosting speculation the central bank will raise rates. Fibria Celulose SA, the world’s biggest pulp maker, retreated on signs Chilean producers may resume production in upcoming weeks after an 8.8-magnitude earthquake. Cia. Siderurgica Nacional SA rose for an eighth day after Itau Unibanco Holding SA recommended buying Brazil’s third-biggest steelmaker. Read the full article on Bloomberg.The Bovespa index lost 0.4 percent to 68,575.47. Forty-four stocks declined on the index while 17 gained. The Bovespa Small Cap index lost 0.3 percent to 1,168.68. The real weakened 0.6 percent to 1.7885 per U.S. dollar.
“An imminent increase in interest rates is worse for domestic-growth linked stocks than exporters,” said Otavio Vieira, who helps manage 1 billion reais ($559 million) at Safdie Private Banking in Sao Paulo. “There were a lot of investors who had concentrated Brazil investment in domestic consumption, and now they may be switching into commodities.”
Bovespa Advance
The Bovespa has climbed 9.3 percent from a three-month low on Feb. 5 as European leaders ordered Greece to get the region’s highest budget deficit under control. The advance has been limited by concern that the central bank will increase interest rates for the first time since September 2008, Citigroup Inc. said.
“The bull market in Brazilian equities has clearly lost some momentum,” Geoffrey Dennis, a Citigroup strategist, wrote in a note dated March 5.
The central bank will likely boost rates to 11.25 percent by the end of this year from a record-low 8.75 percent, according to the bank’s weekly survey of about 100 economists at financial institutions published today.
Cyrela fell 2.6 percent to 21.96 reais, leading declines among real estate companies. MRV Engenharia & Participacoes SA fell 2.8 percent to 12.60 reais. Rossi Residencial SA fell 1.9 percent to 13.73 reais.
Fibria Retreats
Fibria Celulose SA, the world’s biggest pulp maker, retreated on signs Chilean producers may resume production in upcoming weeks after an 8.8-magnitude earthquake.
Fibria dropped 2.2 percent to 35.54 reais after jumping 10 percent last week, the most since December.
“Fibria gained a lot after the Chile earthquake as investors speculated that production would take a while to get back online,” said Carlos Camacho, who helps manage the equivalent of about $2.1 billion at GAP Asset Management in Rio de Janeiro. “Some production is already being restarted, so I expect Fibria to give back most of its gains.”
CSN climbed 2.6 percent to 63.90 reais. The company was raised to “outperform” from “market perform” on the outlook the steelmaker’s mining assets will benefit from a 70 percent jump in iron ore prices this year, Itau analyst Marcos Assumpcao wrote in a note.
“We believe that CSN’s mining assets are worth $22.4 billion, while investors price in only $17.2 billion,” the Sao Paulo-based analyst wrote.
Gerdau, Latin America’s biggest steelmaker, rose 0.7 percent to 27.35 reais. Usiminas, Brazil’s second-biggest steelmaker, rose 0.8 percent to 54.68 reais.
JBS SA, the world’s biggest beef producer, rose after reporting fourth-quarter profit of 127.8 million reais, reversing a year-earlier loss. JBS climbed 1.9 percent to 9.67.
The Bovespa has lost less than 0.1 percent this year. The measure soared 83 percent in 2009, its best performance since 2003, as domestic demand, government stimulus plans and rising prices for Brazil’s commodity exports helped pull the economy out of recession faster than most countries. The real surged 33 percent in 2009, the best performance among 26 emerging-market currencies tracked by Bloomberg. The currency has dropped 2.4 percent this year.
To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.
