The Bovespa index plunged into a bear market on concern a worsening global economy will curb demand for Brazilian exports after a quarter in which most companies reported earnings that trailed estimates.
The benchmark slid 3.3 percent to 54,038.20 at the close of trading in Sao Paulo, extending its drop to 21 percent from a bull-market high on March 13. The measure had jumped 41 percent from an Aug. 8 low through that day. The real fell 0.4 percent today to 2.0087 per U.S. dollar, the weakest level since July 2009.
Concern that Europe’s sovereign debt crisis is deepening while economic growth slows in China is pushing stocks lower across emerging markets. MSCI Inc.’s index of the so-called BRIC countries fell 1.4 percent today, extending its drop from this year’s high to more than 20 percent as well. Russia’s Micex Index entered a bear market on May 17.
“What’s been really impacting the market in the past few weeks is Europe more than anything else,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York, said in a phone interview. “There were some disappointments in first-quarter earnings, but most of what’s going on right now is related to global risk aversion.”
Emerging-market stocks are dropping as Greece struggled to form a new government following an inconclusive May 6 election and as a rise in Spain’s borrowing costs at an auction rekindled speculation that the crisis is spreading. In Brazil, 32 of the 61 companies in the Bovespa that have reported quarterly earnings have missed analysts’ estimates, while 24 beat forecasts, data compiled by Bloomberg show.
A slowdown in China, Brazil’s biggest trading partner, also dims the outlook for the Bovespa as raw-material producers account for 44 percent of the index’s weighting, said Rogerio Freitas, a partner at Rio de Janeiro-based hedge fund Teorica Investimentos.
“China is deliberately hitting the brakes as the government tries to keep growth at a more sustainable level,” Freitas said by phone. Premier Wen Jiabao cut China’s target for 2012 economic expansion in March and reports showed export and import increases missed estimates in April while industrial output growth was the slowest since 2009.
LLX Logistica SA, the port developer controlled by billionaire Eike Batista, fell 7.5 percent to 2.48 reais today, the worst performer on the Bovespa index.
B2W Cia. Global do Varejo tumbled 4.9 percent to 7.12 reais after rallying 16 percent yesterday, when a report from Valor Economico said parent company Lojas Americanas SA will delist B2W shares. The online retailer said it “doesn’t know of any reason” for the recent fluctuations in its share price, according to a regulatory filing yesterday after markets closed.
Homebuilders have been the worst performers on the Bovespa since the bull market peak. PDG Realty SA, the country’s largest, dropped the most, tumbling 56 percent to 3.41 reais. Rossi Residential SA was the second-worst, falling 52 percent to 5.53 reais, followed by Brookfield Incorporacoes SA, which slid 48 percent to 3.71 reais.
The Bovespa trades at 9.1 times analysts’ earnings estimates for the next four quarters, which compares with the 8.2 ratio for MSCI’s BRIC Index, which includes stocks in Brazil, Russia, India and China, data compiled by Bloomberg show.
Trading volume was 8.3 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.2 billion reais this year through May 15, according to data from the exchange.
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