Bloomberg News

Bovespa Snaps Six-Day Gain on Concern Greek-Debt Talks Will Fail

February 09, 2012

Feb. 8 (Bloomberg) -- The Bovespa stock index snapped six days of gains on concern a worsening European debt crisis will dissuade foreign investment in Brazilian stocks as Greek officials continued to negotiate over spending cuts needed to secure bailout funds.

Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, fell after it was cut to “underweight” from “neutral” at HSBC Holdings Plc. Industrias Romi SA, a Brazilian machinery manufacturer, slumped the most in almost five years after it reported a fourth-quarter loss that was wider than estimated.

The Bovespa slid 0.1 percent to 65,831.16 at the close of Sao Paulo trading. Forty stocks fell on the gauge, while 29 rose. The real gained 0.3 percent to 1.7206 per U.S. dollar.

European Central Bank policy makers are still divided on what contribution to make as part of a Greek debt restructuring, Reuters reported, citing two unidentified monetary-policy sources. Euro-area finance ministers are due to gather tomorrow in an emergency meeting in Brussels as the Greek government pushes to complete talks on terms of a rescue.

“The fact that Greece is taking so long to reach a solution to its debt problem is letting investors down,” Renato Bandeira de Mello, head of equity trading at Futura Corretora, said by phone from Sao Paulo. “One of the reasons for the Bovespa’s performance this year so far is that foreign investors are pouring money into the market. With a more uncertain outlook for Europe, this could change.”

Brazil’s benchmark equity gauge has advanced 16 percent this year, buoyed by interest-rate cuts, signs of growth in the U.S. and signals that Europe may be moving closer to resolving its debt crisis. Foreign investors poured 7.17 billion reais ($4.17 billion) into Latin America’s largest equity market in January, according to data compiled by Bloomberg. They pulled 1.35 billion reais from the Bovespa in 2011.

Inflation Slows

CSN, as Cia. Siderurgica is known, fell 1 percent to 18.42 reais.

The Bovespa earlier gained as much as 0.7 percent as signs of slowing inflation spurred speculation policy makers will have more room to lower borrowing costs, boosting the outlook for companies that sell on credit.

Consumer prices in Brazil, as measured by the IPC-S index, rose 0.46 percent in the 30 days through Feb. 7, from 0.81 percent in the previous period, the Getulio Vargas Foundation said today. That was less than the 0.65 percent median estimate of 21 economists surveyed by Bloomberg.

In the interest-rate futures market, yields on most contracts fell. The yield on the contract due in January 2013 dropped six basis points, or 0.06 percentage point, to 9.39 percent.

Romi Tumbles

Romi plunged 14 percent to 5.74 reais, the most since March 2007. The company reported a fourth-quarter loss of 17.2 million reais, according to a regulatory filing yesterday. That compares with a mean estimate of a loss of 4.27 million reais in a Bloomberg survey of three analysts.

The Bovespa trades at 10.4 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 7.96 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 6.53 billion reais this year through Feb. 3, according to data from the exchange.

--Editors: Richard Richtmyer, 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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