Bloomberg News

Bovespa Drops as Slower China Growth Seen Hurting Brazil Exports

March 05, 2012

The Bovespa index declined the most in three weeks after China lowered its economic growth target, spurring concern a slowdown in Brazil’s biggest trading partner may hurt exports.

Vale SA (VALE5), the world’s largest iron-ore producer whose top export market is China, and competitor MMX Mineracao & Metalicos SA (MMXM3) followed metals lower. Online retailer B2W Cia. Global do Varejo paced declines by companies that sell in the local market after economists covering Brazil raised their 2013 inflation forecast for a third straight week.

The Bovespa fell 1.2 percent to 66,964.03 at the close of trading in Sao Paulo. Forty-six stocks sank on the gauge, while 23 gained. The real weakened 0.5 percent to 1.7395 per U.S. dollar.

China pared its economic growth target to 7.5 percent from an 8 percent goal in place since 2005, Premier Wen Jiabao said in a state-of-the-nation speech delivered at the annual meeting of the National People’s Congress in Beijing today.

“The lower growth forecast is particularly negative for stocks linked to commodities, especially those that depend more on exports to China, such as mining companies,” Gustavo Mendonca, who helps oversee 250 million reais ($144 million) at Oren Investimentos, said by phone from Rio de Janeiro.

Vale slid 2.9 percent to 42.04 reais, contributing the most to the Bovespa’s drop. MMX, the iron-ore producer controlled by billionaire Eike Batista, sank 4.1 percent to 9.56 reais. The Bloomberg Base Metals 3-Month Price Commodity Index (CMDIBAS3) lost 1.5 percent.

Inflation Forecast

Online retailer B2W Cia. Global do Varejo dropped 2.6 percent to 9.68 reais, leading declines by companies that sell in the local market, after a central bank survey showed economists covering Brazil raised their 2013 inflation forecast for a third straight week.

Consumer prices in Brazil will increase 5.2 percent next year, according to the median forecast in a March 2 central bank survey of about 100 economists published today, up from an estimate of 5.11 percent the previous week and 5.02 percent two weeks ago. Policy makers target annual consumer price rises of 4.5 percent, plus or minus two percentage points.

In the Brazilian interest-rate futures market, yields on most contracts fell. The yield on the contract due in July dropped two basis points, or 0.02 percentage point, to 9.32 percent.

Itau, Santander Fall

Itau Unibanco Holding SA (ITUB4), Latin America’s biggest bank by market value, dropped 1.5 percent to 37.15 reais, and Banco Santander Brasil SA (SANB11) declined 3.8 percent to 18.72 reais. Both were cut to “market perform” from “outperform” at Bradesco Corretora, according to a research note dated March 2.

The Bovespa has advanced 18 percent this year after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The gauge trades at 10.8 times analysts’ earnings estimates, compared with a 10.7 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.22 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.22 billion reais this year through March 1, according to data from the exchange.

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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