Bloomberg News

Bovespa Index Drops as Economists Cut Brazil’s Growth Forecast

January 07, 2013

The Bovespa (IBOV) stock index fell to a one-week low after analysts lowered forecasts for Brazil’s economic growth this year, adding to concern that a sluggish recovery may hurt corporate earnings.

Natura Cosmeticos SA, Brazil’s biggest cosmetics maker, had its biggest one-day slump in almost four months. Centrais Eletricas Brasileiras SA led a rout by power utilities on concern low water levels at hydropower dams may compel Brazil to ration electricity this year. Securities clearinghouse Cetip SA- Mercados Organizados fell after HSBC Holdings Plc lowered its recommendation to the equivalent of hold.

The Bovespa retreated 0.9 percent to 61,932.54. Forty-eight stocks dropped on the gauge while 18 advanced. The real rose 0.2 percent to 2.0276 per U.S. dollar. Brazil’s gross domestic product will expand 3.26 percent this year, according to the median forecast in a Jan. 4 central bank survey of about 100 economists published today. They had forecast expansion of 3.3 percent a week earlier.

“In the short term, investors will be watching for signs that growth is picking up, and for now things don’t look so good, as the central bank survey showed,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview.

Brazil has cut taxes on some consumer goods and reserve requirements for banks and made the biggest rate reductions among Group of 20 nations last year to revive growth.

Natura lost 3.2 percent to 57.89 reais. Cetip fell 1.3 percent to 25.70 reais.

‘Actual Improvements’

“We need to see some actual improvements in the economic outlook, both for Brazil and the rest of the world, so that stocks can sustain the rally initiated in the first sessions of the year,” Joao Pedro Brugger, who helps oversee 220 million reais at Leme Investimentos in Florianopolis, Brazil, said in a phone interview.

Eletrobras, as the electric utility is known, tumbled 4.7 percent to 10.69 reais, and all but one stock on the Bovespa’s Electric Energy index tumbled. President Dilma Rousseff called an emergency meeting to discuss the level of water reservoirs in Brazil because of risk of energy rationing, Folha de S.Paulo reported today, citing people in government it didn’t identify.

When contacted by Bloomberg News, a presidential press officer who asked not to be identified in accord with internal policy said Rousseff is on vacation and there is no such meeting on her schedule.

The Ministry of Mines and Energy said in a statement today on its website that Minister Edison Lobao will hold a monthly meeting with government officials and regulators on Jan. 9. Utility representatives may also attend, according to the statement, which didn’t mention Rousseff.

Reservoirs Levels

Reservoirs in northeastern Brazil were 32 percent full, on average, last month, less than the 34 percent minimum the government considers safe for the region’s dams, according to data on the national power grid operator’s website.

The Bovespa entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations and borrowing costs at a record low in Brazil boosted equity demand. The index trades at 11 times analysts’ earnings estimates for the next four quarters, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for the gauge’s members was 28 percent higher today than the average over the past five days, data compiled by Bloomberg show.

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 at papadopoulos@bloomberg.net


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