Brazil what's cool right now
Brazil’s Bovespa Rises as Metals Gain Offsets Energy Decline
By Alexander Ragir
March 26 (Bloomberg) -- Brazil’s Bovespa stock index gained for the first day in three as raw-materials producers rallied on higher metals prices, offsetting a retreat in energy companies.
Gerdau SA and Cia. Siderurgica Nacional SA advanced, leading a rally in steelmakers, after Banco BTG Pactual SA said rising costs of coal and iron ore will boost steel prices. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, slid as crude prices fell for a third day and investors speculated Congress will fail to approve the company’s capital increase.
The Bovespa index added 0.4 percent to 68,682.66, paring its weekly decline to 0.2 percent. Thirty-five stocks rose on the index while 24 stocks declined. The BM&FBovespa Small Cap index lost 0.3 percent to 1,151.92. The real was little changed, gaining 0.01 percent to 1.8190 per dollar.
“The market may stay sideways for a while,” said Debora Morsch, who helps manage the equivalent of $400 million at Solidus Brokerage in Porto Alegre, Brazil. “There just isn’t huge news that will trigger a strong rally or selloff.”
The Bovespa slid for a second session yesterday as declining oil prices dragged down energy producers and central bank minutes reinforced expectations for an interest rate increase next month.
Emerging-market stocks advanced for the first time in three sessions today after Greece received a promise of aid from European leaders and China’s central bank indicated it will be cautious in raising interest rates.
Greek Aid
Leaders of the 16-nation euro region endorsed a Franco- German proposal for a mix of International Monetary Fund and bilateral loans at market interest rates, while voicing confidence that Greece won’t need outside help to cut Europe’s biggest budget deficit. The Shanghai Composite Index climbed 1.3 percent after China’s central bank Deputy Governor Zhu Min said yesterday that policy makers are “very careful on the interest rate, because it is a heavy-duty weapon.”
Gerdau, Latin America’s biggest steelmaker, rose 3.2 percent to 2.24 reais. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, rose 0.8 percent to 56.80 reais, while third-biggest CSN gained 1.6 percent to 34.79 reais.
“The strong cost push steel raw materials are experiencing should drive steel prices up,” Edmo Chagas, an analyst at Pactual, wrote in a note to investors. “We also see tightness in these markets limiting steel production growth in certain regions (i.e. China) and supporting further price upside as steel demand firms up.”
The Bloomberg Base Metals 3-Month Price Commodity Index climbed 1.6 percent.
Petrobras Retreats
Petrobras preferred shares, the most traded, sank 2 percent to 34.50 reais on speculation that the company will sell only preferred shares should Congress not approve its planned capital increase. Gustavo Gattass, an analyst at Banco BTG Pactual SA, wrote in an e-mail to clients that the company said in a meeting with analysts it may consider selling only non-voting, or preferred, shares in the event that Congress doesn’t approve its capital increase.
Crude oil fell after a government report that the U.S. economy strengthened less than forecast, raising concern that growth in fuel demand may slow.
Cyrela Brazil Realty SA Empreendimentos & Participacoes, Brazil’s largest property developer, fell 0.8 percent to 21.10 reais after fourth-quarter sales slowed from the previous quarter.
Brazil’s stock market is forming a “bubble” and may suffer a “correction” next year as valuations soar, according to Gerard Cremoux, co-head of Latin America investment banking at UBS AG.
Share Sales
The increase in companies issuing shares shows that Brazil’s stock market is becoming overvalued, Cremoux said. OSX Brasil SA delayed and cut an initial public offering last week that was originally planned to be the biggest in the world this year. Petroleo Brasileiro may raise $15 billion to $25 billion in a planned share sale, Chief Executive Officer Jose Sergio Gabrielli said this week. The share sale may climb to $35 billion, Cremoux said.
“Brazil looks like a bubble,” Cremoux said at Columbia University in New York. “The market expects a lot of activity in Brazil this year. We might see the biggest equity offering ever. You can become a bit skeptical.”
The benchmark Bovespa index has gained 61 percent in the past year as Latin America’s biggest economy emerged from its first recession since 2003. The rally has pushed the index’s price to 17.7 times the reported earnings of its companies, more than the four-year average of 14.2 times, according to data compiled by Bloomberg. The “long term looks good” for Brazil, Cremoux said.
Source: businessweek.com