June 29 (Bloomberg) -- Cia. Brasileira de Meios de Pagamentos, the Brazilian affiliate of Visa Inc., climbed 12 percent in its first day of trading as investors bet credit card use will grow in Latin America’s largest economy.

VisaNet, as the company is known, rose 1.77 reais to 16.77 reais in Sao Paulo trading, from the offering price of 15 reais. Redecard SA, the Sao Paulo-based processor of payments for Mastercard Inc., dropped 4.3 percent as some investors sold shares to buy its rival.

Shareholders of Sao Paulo-based VisaNet are raising 8.4 billion reais ($4.3 billion) in the world’s biggest initial public offering in more than a year. The IPO priced at the high end of the estimated range as demand exceeded the amount offered, said Carlos Camacho of GAP Asset Management.

“The business is promising,” said Camacho, who helps manage 3 billion reais in Rio de Janeiro and bought VisaNet shares. “The fact that demand was higher than the offer also means that those whose bids weren’t fully met have to go to the market.”

Brazil’s credit card market expanded 22 percent in 2008 and about 20 percent every year since 1995, according to Itau Unibanco Holding SA, the nation’s largest bank.

Volume Growth

Card payments account for 22 percent of Brazil’s private sector consumption, compared with 40 percent in developed countries, according to Federico Rey-Marino, a Buenos Aires- based analyst with Raymond James & Associates Inc. He estimates card volumes will grow 16 percent annually over the next 5 years, reaching 29 percent of consumption.

VisaNet’s IPO set a record in Brazil. The sale includes a possible supplemental offering, or “over-allotment.” A complete sale of the over-allotment will make it the biggest in the world since San Francisco-based Visa, the owner of 10 percent of the Brazilian affiliate, raised $17.9 billion in March 2008.

Redecard fell 1.40 reais to 31. Investors who weren’t able to purchase all the shares they wanted during the IPO are likely selling Redecard to buy VisaNet, said Otavio Vieira, who manages 1.1 billion reais at Safdie Private Banking in Sao Paulo.

“Some funds are doing this, switching out of Redecard into VisaNet, thinking it’s a better stock,” Vieira said in a phone interview.

‘Too Much Demand’

Investors were only able to buy 38 percent of the VisaNet shares they requested, according to Vieira, who said his firm didn’t purchase the stock because it doesn’t buy IPOs. Brazil’s securities regulator hasn’t released data on how much investors were able to buy.

“There was too much demand in the IPO so people who were left behind need to buy the shares in the market,” said Marcello Paixao, who oversees 260 million reais as a partner at Principia Capital Management in Sao Paulo. “It’s an attractive business with good margins.”

Lower interest rates will also boost consumption and lead to more use of credit cards, said Augusto Lange, who helps manage 650 million reais at Neo Gestao de Recursos in Sao Paulo.

Brazilian policy makers have cut the benchmark lending rate to a record low 9.25 percent to help pull the economy out of its first recession since 2003. The $1.3 trillion economy will shrink 0.5 percent this year and expand 3.5 percent in 2010, according to a central bank survey of 100 analysts.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

Last Updated: June 29, 2009 16:28 EDT