Centrais Eletricas Brasileiras SA (ELET6), South America’s largest power generator, advanced in Sao Paulo trading, snapping a five-day losing streak that pushed it to the lowest in 10 years.
The state-run utility’s preferred shares jumped 4.1 percent to 7.60 reais at 4:15 p.m. local time after surging as much as 10 percent. The gain pared this week’s decline to 34 percent. The benchmark index gained 1.3 percent today and is up 3.2 percent in the past five days.
Eletrobras, as the utility is known, has plunged 51 percent this month, the most among members on the MSCI Brazil/Utilities index, on concern President Dilma Rousseff’splan for rate cuts of as much as 28 percent will erode profits. The prospect that the stock price may have hit bottom probably has some traders covering short positions, or bets on price declines, according to Marcel Kussaba, the head of equity research at Quantitas Asset Management.
“Eletrobras’s advance today is purely a technical move, because it’s impossible now to make a valuation based on the company’s fundamentals,” Kussaba said by phone from Porto Alegre, Brazil. “Nobody knows yet the size of the losses it will suffer because of the new rules.”
The government is offering Eletrobras 14 billion reais ($6.7 billion) in cash as compensation for agreeing to modify rates laid out in contracts set to expire in 2015 and 2017, less than half the 30 billion reais the company had said it expected to receive.
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