Bloomberg News

Rossi Leads Homebuilders’ Rally on Sub-10% Rate Outlook

January 26, 2012

(Updates with closing prices in second paragraph.)

Jan. 26 (Bloomberg) -- Rossi Residencial SA surged to a seven-week high, leading a rally among homebuilders, on speculation cheaper credit will lift sales after policy makers signaled plans to cut the benchmark lending rate to below 10 percent.

Rossi, Brazil’s sixth-biggest homebuilder by revenue, advanced 6.4 percent to 9.71 reais at the close of trading in Sao Paulo, the highest price since Dec. 9. Rival MRV Engenharia & Participacoes SA jumped 5.3 percent to 14.16 reais, extending this year’s advance to 32 percent, the best performance on the benchmark Bovespa index, which climbed 11 percent in the same period. The BM&FBovespa Real Estate Index rose 2.7 percent today, the most in three weeks.

After growth in the world’s second-biggest emerging market slowed more than expected in the second half of last year, the central bank’s board said it sees “a high probability” that it will cut the benchmark interest rate below 10 percent, according to the minutes from a Jan. 17-18 meeting published today.

“Homebuilders have gained on the prospects of lower interest rates, as cheaper credit is surely positive for the industry,” Joao Pedro Brugger, who helps oversee 80 million reais ($46 million) at Leme Investimentos in Florianopolis, Brazil, said by phone today. “Today the central bank indicated it’s confident that its strategy is working, so rates should keep falling further.”

The bank’s board, led by President Alexandre Tombini, voted unanimously at last week’s meeting to cut the benchmark rate to 10.5 percent, the fourth straight reduction.

--Editors: Richard Richtmyer, David Papadopoulos

To contact the reporter on this story: Ney Hayashi in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos in New York at

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