Bloomberg News

Bovespa Index Rises to 5-Week High on Commodities, Rate Outlook

October 24, 2011

Oct. 24 (Bloomberg) -- The Bovespa index rose to its highest level in five weeks as steelmaker Cia. Siderurgica Nacional SA followed commodities prices higher on optimism growth in China will boost demand, while speculation Brazilian policy makers will reduce interest rates lifted companies that depend on domestic demand.

CSN, as Cia. Siderurgica is known, led gains on the MSCI Brazil/Materials index, which was the best performer among 10 industry groups. Vale SA, the world’s largest iron-ore miner, advanced the most in three months as industrial metals posted the biggest advance in three years. Homebuilder Gafisa SA paced gains among stocks that depend on domestic demand.

The Bovespa jumped 3 percent to 56,891.97 at the close of trading, the highest level since Sept. 19. Sixty-two stocks advanced on the index, while six dropped. The real strengthened 1.4 percent to 1.7506 per U.S. dollar.

“As long as China keeps growing at around 9 percent a year, which seems to be the case at least in the short run, commodities are likely to keep rising,” Gustavo Mendonca, who helps manage 250 million reais ($142.3 million) as an economist at Oren Investimentos in Rio de Janeiro, said in a phone interview. “This is positive for the Bovespa, as producers have a big weighting on the index.”

Industrial metals in London jumped the most in three years as manufacturing rebounded in China, the world’s top consumer, and European governments moved closer to containing the region’s debt crisis.

China, Europe Debt

Chinese manufacturing might expand in October for the first month in four after a preliminary purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today climbed to 51.1 from September’s final reading of 49.9.

European leaders outlined plans to aid banks and ruled out borrowing unlimited amounts from the European Central Bank to boost a rescue fund.

On the London Metal Exchange, an index measuring six industrial metals rose 5.9 percent, the biggest gain since October 2008.

The Standard & Poor’s GSCI Index of 24 raw materials gained 2.4 percent.

CSN advanced 6.3 percent to 14.94 reais, the most since Aug. 11. Vale rose 5.9 percent to 40.12 reais.

In the Brazilian interest-rate futures market, yields on most contracts fell after a survey showed economists reduced their 2011 and 2012 inflation forecasts.

Price Increases

Consumer prices will increase 5.60 percent in Brazil next year, according to the median forecast in an Oct. 21 central bank survey of about 100 economists published today, compared with a forecast of 5.61 percent the previous week. Prices as measured by the IPCA index will rise 6.50 percent this year, from a week-earlier forecast of 6.52 percent, the survey showed. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

Yields on the interest-rate futures contract due in January 2013, the most traded today in Sao Paulo, fell seven basis points, or 0.07 percentage point, to 10.41 percent.

Gafisa climbed 5.9 percent to 6.30 reais.

Hypermarcas SA, the Brazilian consumer-products company that made at least 12 acquisitions since the start of 2010, increased 5.3 percent to 9.59 reais after it agreed to sell some assets as it seeks to concentrate in pharmaceutical and personal hygiene products. The company agreed to sell a plant in the southern state of Santa Catarina and the brands Assim, Sim, Gato, Fluss, Sanifleur and Mat Inset to Flora Produtos de Higiene e Limpeza SA, a unit of J&F Participacoes SA, for 140 million reais, according to a regulatory filing.

J&F Participacoes is a holding company that indirectly controls beef producer JBS SA. JBS jumped 8.9 percent to 4.78 reais.

HRT, Petrobras

Oil and gas company HRT Participacoes em Petroleo SA slumped 8.7 percent to 735 reais. Petroleo Brasileiro SA, the state-controlled oil producer known as Petrobras, doesn’t plan to share a natural gas pipeline in the Amazon with HRT, Valor Economico reported, citing Luiz Feradans, the general manager of Amazon exploration for Petrobras. The company will have to find an alternative route to ship its gas out of the Amazon to make money from production, Valor said.

HRT may form associations with “other players” apart from Petrobras to transport natural gas in the Amazon, Chief Executive Officer Marcio Mello told reporters today in Sao Paulo.

The Bovespa entered a bear market in July after plunging 20 percent from its 2010 bull-market peak. The measure has since extended that drop to 22 percent and trades at 9.7 times analysts’ earnings estimates, weekly data compiled by Bloomberg show. That compares to a ratio of 10 for MSCI Inc.’s gauge of 21 developing nations’ equities.

Traders moved 6.87 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares to a daily average this year of 6.58 billion reais through Oct. 13, according to data from the exchange.

--Editors: Richard Richtmyer, Marie-France Han

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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