Bloomberg News

Brazilian Stocks Rise as AES Tiete Leads Utilities Rally

January 10, 2013

Brazilian stocks advanced for a second day as AES Tiete SA (GETI3) led gains by power utilities amid speculation electricity rates may be increased to make up for rising costs in the industry.

The MSCI Brazil/Utilities index rose after after Energy Minister Edison Lobao said rates may rise if a lack of rain reduces output at hydropower dams and forces the use of natural- gas plants to meet demand. Clothing retailer Cia. Hering plunged the most since June 2009 after reporting sales that missed some analysts’ estimates.

The benchmark Bovespa index climbed 0.2 percent to 61,678.31 at the close of trading in Sao Paulo. Thirty-seven stocks rose on the measure while 31 dropped. The real climbed 0.6 percent to 2.0290 per U.S. dollar.

“For power utilities, things are still a bit crazy,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “I don’t think it’s likely for Brazil to ration electricity because of the rain problem, but electricity prices will probably have to rise to make up for the decline in energy supply.”

AES rallied 3.7 percent to 21.85 reais. Cia. Energetica de Sao Paulo, the power company known as Cesp, added 3.2 percent to 19.50 reais. Concern has mounted this week that the government will ration electricity to avoid blackouts after reservoir levels at dams accounting for most of Brazil’s generating capacity fell to a 12-year low last month.

Hering Drops

Hering slumped 12 percent to 38.35 reais after saying in a regulatory filing that fourth-quarter gross revenue rose 10.7 percent from a year earlier. Banco Santander SA, which had projected a 12.1 percent increase, called the results “weak.”

The Bovespa (IBOV) 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 while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its gain to 18 percent.

Brazil’s equity index trades at 11.2 times analysts’ earnings estimates for the next four quarters, compared with 11 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 7.92 billion reais in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.25 billion reais in 2012, according to data compiled by 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 at papadopoulos@bloomberg.net


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