Bloomberg News

Gafisa Tumbles as Homebuilders Fall on Brazil Rate Cut Pace

October 20, 2011

(Updates with closing prices in second paragraph.)

Oct. 20 (Bloomberg) -- Gafisa SA fell the most in more than two weeks as homebuilders declined after traders pared bets for lower borrowing costs in Brazil following the central bank’s decision to cut the benchmark rate by a half percentage point.

Gafisa dropped 5.2 percent to 5.83 reais at the close of trading, the most since Oct. 3. It had gained 9.2 percent in the previous two sessions. The BM&FBovespa Real Estate index fell 2.6 percent.

Brazil’s central bank, led by President Alexandre Tombini, voted unanimously yesterday to reduce the benchmark Selic rate to 11.5 percent from 12 percent, quelling speculation it would accelerate the pace of cuts.

“Homebuilders rose in the past few days because they were pricing in a cut bigger than 0.5 point,” Fabio Cardoso, a partner at Rio de Janeiro-based equity advisory firm Adinvest Consultoria, said in a telephone interview today. “It didn’t happen, so they erased part of those gains.”

Policy makers said in a statement yesterday that a “moderate adjustment” in the Selic rate “is consistent” with the goal of bringing inflation to target by 2012. The statement signals the central bank won’t accelerate the pace of cuts, Carlos Thadeu de Freitas Gomes Filho, chief economist at Franklin Templeton Investments in Sao Paulo, said in a telephone interview.

Yields on most Brazilian interest-rate futures contracts rose today. Yields on the contract due in January 2013 climbed six basis points, or 0.06 percentage point, to 10.50 percent.

--Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

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


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