Bloomberg News

Bovespa Drops as Chinese Iron Ore Demand Outlook Weighs on Vale

September 29, 2011

Sept. 29 (Bloomberg) -- The Bovespa index declined as signals that China may reduce its dependency on imported iron ore dragged down Vale SA, the world’s largest producer of the steelmaking material, and overshadowed gains by banks.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- biggest steelmaker, fell after Moody’s cut its rating outlook to negative. Itau Unibanco Holding SA, Latin America’s largest bank by market value, gained after it agreed to acquire the Chilean retail banking unit of HSBC Holdings Plc.

The Bovespa fell 0.4 percent to 53,039.55 at 2:39 p.m. New York time. Thirty-four stocks fell on the index while 33 rose. The gauge earlier advanced as much as 1.8 percent as U.S. economic data eased concern about a slowdown, and after Germany approved changes to a European bailout fund. The real weakened 0.1 percent to 1.8433 per U.S. dollar from 1.8408 yesterday.

“Their was a strong start earlier today, but it was mostly speculative, and fundamentals in global markets aren’t strong,” Joao Pedro Brugger, an analyst at Leme Investimentos Ltda., said in a phone interview. “The market will continue to look for guidance outside.”

China aims to reach a self sufficiency ratio of domestic iron ore of more than 50 percent between 2011 and 2015, Zhang Changfu, vice-chairman of the China and Iron Steel Association said at a conference Wednesday, according to a report from Asia News Network.

“That is a sign that they want to depend less on Brazil and Australia,” Brugger said.

Vale fell 2 percent to 39.76 reais. Usiminas dropped 2.2 percent to 10.93 reais. Itau rose 0.5 percent to 29.23 reais.

The Bovespa entered a bear market on July 27 after plunging 20 percent from its bull-market peak in November. The measure extended that drop to 27 percent through yesterday.

Traders moved 5.31 billion reais ($2.9 billion) in stocks in Sao Paulo yesterday, data compiled by Bloomberg show. That compares to a daily average this year of 6.53 billion reais through Sept. 14, according to data from the exchange.

--Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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