The Bovespa (IBOV) index fell the most in six weeks as utilities tumbled amid concern that Brazil may ration electricity because of low reservoir levels at hydropower dams.
State-controlled Centrais Eletricas Brasileiras SA (ELET6) was the worst performer on the gauge after O Estado de S.Paulo reported the government is considering the risk of energy rationing, citing a person with the federal administration it didn’t name. Iron-ore producer MMX Mineracao & Metalicos SA and cosmetics maker Natura Cosmeticos SA tumbled after each separately disclosed charges from Brazil’s tax authority.
The Bovespa lost 1.3 percent to 61,127.84, extending its decline since Jan. 3 to 3.5 percent. Forty-five stocks fell on the measure today while 20 advanced. Trading volume for the Bovespa’s members was 25 percent higher today than the average over the past ten days, data compiled by Bloomberg show. The real slid 0.7 percent to 2.0415 per dollar.
“The risk of electricity rationing is something we can’t rule out right now,” Roberto Altenhofen, an analyst at Sao Paulo-based consulting firm Empiricus Research, said in a phone interview. “It depends on factors that are very hard to predict, such as weather conditions.”
Brazil “sees no risk of electricity rationing,” Deputy Energy Minister Marcio Zimmermann told reporters in Brasilia today. Reservoirs in northeastern Brazil on average were 32 percent full 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.
Preferred shares of Eletrobras, as Centrais Eletricas Brasileiras is known, tumbled 9.4 percent to 9.69 reais, the lowest since Dec. 13.
MMX, the iron-ore producer controlled by billionaire Eike Batista, slumped 3.6 percent to 4.29 reais after saying in a regulatory filing that Brazilian authorities ordered it to pay 3.76 billion reais for overdue taxes. The company said it will appeal the claim.
Natura dropped 4.7 percent to 55.20 reais. The company said it will appeal a tax authority order to pay 627.9 million reais.
Banco Santander Brasil SA, the Brazilian unit of Spain’s biggest bank, gained 1.9 percent to 15.07 reais after Banco BTG Pactual SA raised its recommendation to the equivalent to hold.
The Bovespa earlier gained as much as 0.5 percent after Valor Economico reported that Brazil may cut taxes this year to shore up growth, citing an interview with Finance Minister Guido Mantega.
The Finance Ministry declined to comment on Valor’s report when contacted by Bloomberg News.
Embraer SA, the world’s fourth-largest plane builder, retreated 4.2 percent to 13.77 reais, its biggest one-day drop in more than one month after JPMorgan Chase & Co. lowered its recommendation to the equivalent of sell.
“The stock does not fully account for a decline in commercial deliveries,” analysts including Joseph Nadol wrote in an e-mailed note to clients. Embraer will deliver 60 regional jets from its E-Jet family this year, down from a previous forecast of 80, according to JPMorgan’s report.
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 has since pared its gain to 17 percent.
Brazil’s benchmark equity index trades at 11.2 times analysts’ earnings estimates for the next four quarters, which compares with a ratio of 10.9 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 7.51 billion reais in stocks in Sao Paulo today. That compares with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.
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