Bloomberg News

Ibovespa Declines Second Day as Brazil Rate Outlook Saps Gafisa

June 17, 2013

The Ibovespa fell for a second day as Gafisa SA (GFSA3) led losses by Brazilian homebuilders amid concern that rising borrowing costs may curb the recovery in Latin America’s biggest economy.

Oil producer OGX Petroleo & Gas Participacoes SA (OGXP3) contributed the most to the benchmark’s drop, leading declines among companies controlled by the billionaire Eike Batista. Meatpacker Marfrig Alimentos SA (MRFG3) slipped to a one-month low. Plane builder Embraer SA (EMBR3) was the best performer on the gauge after airline SkyWest Inc. placed an order for as many as 200 regional jets valued at $9.36 billion.

The Ibovespa lost 0.5 percent to 49,088.65 at the close of trading in Sao Paulo. The gauge plunged into a bear market last week after falling more than 20 percent from its Jan. 3 peak amid concern that accelerating inflation may hamper Brazil’s recovery.

“Growth is slowing, inflation is high, and there are no signs that things will improve in the short term,” Fernando Goes, an analyst at Sao Paulo-based brokerage Clear Corretora, said in a phone interview.

Brazilian swap rates on most contracts increased after central bank president Alexandre Tombini said there is no limit to increases in borrowing costs as policy makers strive to curb inflation. Economists covering Brazil lowered their 2013 growth forecast to 2.49 percent from 2.53 percent, according to a central bank survey released today.

Petrobras Gains

Gafisa tumbled 6.3 percent to 3.11 reais. OGX sank 15 percent to 82 centavos. Marfrig slid 6.5 percent to 7 reais.

Before falling later in the day, the Ibovespa rose as much as 1.6 percent as Petroleo Brasileiro SA led gains. The state-controlled oil producer said in a statement June 14 that it sold 50 percent of a unit holding African assets to billionaire Andre Esteves’ Banco BTG Pactual SA (BPAC3) for $1.53 billion. The unit, which includes operations in Angola, Benin, Gabon, Namibia, Nigeria and Tanzania, will work as a joint venture with the Brazilian investment bank to explore and produce oil and gas in the region, it said.

“This is good news for Petrobras as it shares costs and risks in large areas that are currently outside its main focus” in Brazilian operations, BES Securities do Brasil SA analysts Oswaldo Telles and Frederico Lebre wrote in a note to clients.

Petrobras rose 0.2 percent to 18.09 reais.

Embraer jumped 6.4 percent to 19.94 reais. The company also said today that it agreed to sell as many as 100 aircrafts to American International Group Inc. (AIG:US)’s leasing unit and 65 planes to five undisclosed airlines.

Brazil’s benchmark equity gauge trades at 11.8 times analysts’ earnings estimates for the next four quarters, compared with a multiple of 10.2 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume for stocks in Sao Paulo was 6.58 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.85 billion reais this year through June 13, 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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