Bloomberg News

Bovespa Futures Fall as Central Bank Signals Limited Rate Cuts

March 15, 2012

Bovespa futures fell, an indication the stock gauge may decline a second day, after Brazilian policy makers signaled they will not cut borrowing costs as much as expected, dimming the outlook for companies that sell in the local market.

Vale SA (VALE5) may move after saying a court overturned a ruling forcing the mining company to pay taxes on profits from overseas units. The latest ruling is provisional, Vale said in an e- mailed statement. Klabin SA (KLBN4), Latin America’s biggest paper maker, may be active after it was lowered to the equivalent of hold from buy at Banco BTG Pactual SA.

Bovespa futures dropped 0.8 percent to 68,220 at 9:33 a.m. in Sao Paulo. The equity gauge has advanced 20 percent this year, 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.

“Some stocks, such as retailers and homebuilders, have gained this year on the back of bets that the central bank would cut the Selic rate in a more aggressive way, maybe below 9 percent, but now it looks like that’s not going to be the case,” Luciano Rostagno, chief strategist at Banco WestLB do Brasil, said by phone from Sao Paulo.

Yields on most Brazilian interest-rate futures contracts surged after policy makers, in the minutes to their March 6-7 meeting, said they see interest rates declining to levels just above the historical low of 8.75 percent. The bank’s board, led by President Alexandre Tombini, last week cut the Selic rate by 75 basis points to 9.75 percent. The yield on the futures contract due in January 2013 rose 26 basis points, or 0.26 percentage point, to 8.93 percent. The real gained 0.3 percent to 1.7983 per dollar.

Hering, Hypermarcas

Retailer Cia. Hering (HGTX3) and consumer products maker Hypermarcas SA (HYPE3) are the best performers this year on the Bovespa. The stocks have jumped 50 percent and 48 percent respectively.

The Bovespa trades at 11.1 times analysts’ earnings estimates, which compares with a 10.9 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show. Traders moved 7.64 billion reais in stocks in Sao Paulo yesterday, data compiled by Bloomberg show. That compares with a daily average of 7.21 billion reais this year through March 8, 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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