Bloomberg News

Bovespa Index Slumps on Europe Concern, Brazil Growth Outlook

December 13, 2011

Dec. 12 (Bloomberg) -- The Bovespa index slumped for the third session in four as commodity producers fell after Moody’s Investors Service said it will review European ratings and as concern mounted that Brazil’s economy may falter.

State-controlled oil producer Petroleo Brasileiro SA and miner Vale SA, the index’s heaviest-weighted companies, followed crude and metals prices lower. Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s second-biggest homebuilder by revenue, paced declines for companies that depend on domestic demand.

The Bovespa slid 1.5 percent to 57,346.86 at the close in Sao Paulo. Fifty-two stocks dropped on the measure while 16 gained. The real weakened 2.5 percent to 1.8440 per dollar.

“We still expect choppy, sideways, challenging markets,” said Frederick Searby, chief Latin America strategist at Deutsche Bank AG in New York. “Brazil looks slightly cheap, but with an overvalued currency.”

Commodities and global stocks fell as Moody’s and Fitch Ratings said last week’s summit did little to ease pressure on Europe’s struggling governments. China’s stocks fell to the lowest level in more than two years after the government pledged to keep property curbs next year and slumping growth in exports to Europe added to concern the economic slowdown is deepening.

Economic Growth Forecast

Economists cut their forecast for Brazil’s 2012 gross domestic product expansion for a third straight week, to 3.4 percent from 3.48 percent previously, according to the weekly central bank survey published today. They also lowered their projection for interest rates next year to 9.5 percent from 9.75 percent.

Petrobras fell 2.6 percent to 22.42 reais while Vale, the largest iron-ore miner in the world, lost 1.5 percent to 38.55 reais. Cyrela declined 2 percent to 15.32 reais.

Vale paid 2.08 billion reais ($1.1 billion) to boost its stake in its fertilizer unit, Vale Fertilizantes SA, after buying most outstanding shares. The miner bought about 84 percent of the voting shares and about 94 percent of preferred shares that it didn’t already own at an auction today, the BM&FBovespa SA exchange said in an e-mailed statement today. Vale previously owned 84.3 percent of the unit, according to Vale Fertilizantes’s website. The exchange didn’t disclose the size of the company’s holdings after the acquisition.

State-controlled electricity utility Cia. Energetica de Minas Gerais rose 3 percent to 30.65 reais, the biggest advance on the Bovespa, after saying it will pay 850 million reais in extraordinary dividends.

Bovespa Valuation

The Bovespa rose on Dec. 9, capping a second consecutive weekly advance, as domestic inflation trailed forecasts and commodities rose.

The gauge entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as Brazil’s interest-rate cuts and speculation Europe was working toward solving its debt crisis buoyed demand for equities. The measure is still down 17 percent this year on concern flagging global commodity demand and quickening inflation will hurt corporate earnings growth.

Brazil’s benchmark equity index trades at 10.3 times analysts’ earnings estimates, more expensive than the ratio of 10.1 for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 4.9 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.52 billion reais through Dec. 1, according to data from the exchange.

--Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

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


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