Bloomberg News

Bovespa Falls Fifth Day as Vale Tumbles on China Manufacturing

November 24, 2011

Nov. 23 (Bloomberg) -- The Bovespa stock index fell for a fifth day as a report showed manufacturing may shrink the most in more than two years in China, Brazil’s biggest trading partner.

Miner Vale SA, whose top export market is China, sank to a one-month low. The MSCI Brazil/Materials Index posted the second-worst performance among ten industry groups as commodities prices tumbled. Lupatech SA, Brazil’s biggest provider of oil equipment and services, plunged the most on record after asking holders of $275 million of bonds to amend some restrictive debt covenants so it can sell assets.

The Bovespa fell 1.6 percent to 54,972.08 at the close of trading in Sao Paulo. Fifty-one stocks dropped on the gauge while 17 rose. The real weakened 2.6 percent to 1.8662 per U.S. dollar.

A preliminary purchasing managers’ index shows China’s manufacturing may contract this month by the most since March 2009, adding to evidence the world’s second-biggest economy is slowing. The reading of 48 reported by HSBC Holdings Plc and Markit Economics today compares with a final number of 51 last month. A number below 50 indicates a contraction.

“If China’s manufacturing is slowing, that will surely affect Brazil’s growth,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said by phone from Sao Paulo. “With Europe and the U.S. struggling with so many problems, the world is counting on China to be the main source of economic growth.”

Consumer Prices

Brazilian consumer prices, as measured by the IPCA-15 index, rose 0.46 percent through mid-November from the previous month, the national statistics agency said today. Economists expected a monthly increase of 0.47 percent, according to the median of 43 estimates from analysts surveyed by Bloomberg.

Credit growth last month slumped to its lowest level since January after a bank workers’ strike interrupted operations and Latin America’s biggest economy showed signs of cooling.

Outstanding credit rose 0.8 percent from September to 1.95 trillion reais ($1.04 trillion), after a 2.1 percent increase in September from August, the central bank said in a report distributed today in Brasilia.

Banco do Brasil SA, Latin America’s biggest bank by assets, dropped 2.5 percent to 23.20 reais, the lowest in more than six weeks. The MSCI Brazil/Financials Index lost 4.6 percent to a seven-week low.

Vale fell 2.5 percent to 39.85 reais, the lowest since Oct. 25. The Standard & Poor’s GSCI index of 24 raw materials dropped as much as 1.9 percent.

Lupatech Plummets

Caxias do Sul, Brazil-based Lupatech sank 20 percent to 4.65 reais, the most since 2006 when it first sold shares in Sao Paulo. The company is seeking consent to remove a guarantee on its 9.875 percent perpetual bonds, according to a statement distributed by PR Newswire. The bonds are backed by the company’s Steelinject Injecao de Acos unit.

Lupatech said Oct. 13 it may sell Steelinject to Forjas Taurus SA for 14 million reais. Lupatech, whose cash flow was enough to cover only about a third of its interest expenses in the year through the third quarter, according to data compiled by Bloomberg, is selling assets after its biggest client, Petroleo Brasileiro SA, delayed orders in the past three years.

The Bovespa entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as cheap valuations and declining interest rates lured investors amid improving prospects for a solution to Europe’s debt crisis. The index since pared its advance to 13 percent.

Brazil’s benchmark equity gauge trades at 10.2 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s gauge of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 5.65 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.54 billion reais through Nov. 21, 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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