May 1 (Bloomberg) -- Brazil's stock market reclaimed its lead over the world's 20 biggest equity benchmarks this year after Standard & Poor's awarded the country an investment grade credit rating, pushing the Bovespa index to a record.

The Bovespa jumped the most since October 2002 yesterday after S&P's unexpected upgrade boosted shares of banks and real- estate companies. The rally turned the Bovespa's 2008 loss into a gain of 6.2 percent, better than the S&P 500 Index, the U.K.'s FTSE 100 Index and France's CAC 40 Index.

Uniao de Bancos Brasileiros SA and Cyrela Brazil Realty SA Empreendimentos e Participacoes helped the Bovespa overtake the 4.9 percent rise in Taiwan's Taiex Index and the 0.8 percent gain in Canada's S&P/TSX Composite Index. Gauges in the rest of the 20 largest markets declined as the MSCI World Index dropped 5 percent in the first four months.

``Brazil is on the radar screen of global investors right now,'' said Simon Nocera, a former manager at Soros Fund Management LLC and co-founder of San Francisco-based hedge fund Lumen Advisors LLC, which added to Brazil holdings yesterday. ``What is key is the cost of capital coming down. That leaves more profit for investors.''

`Time Of Turbulence'

S&P increased Brazil's long-term foreign currency debt rating to BBB- from BB+ after Latin America's biggest economy grew at the fastest pace since 2004 last year and foreign direct investment climbed to a record $34.6 billion. Brazil, once the world's largest emerging-market debtor, became a net foreign creditor for the first time in January as rising demand for the nation's metals, sugar and soybeans fueled exports.

``It's a good time for investors to have this happen, it gives some comfort in a time of turbulence,'' said Jacopo Valentino, a portfolio manager at BNP Paribas in Sao Paulo. ``An upgrade like this always helps the psychological side of the investors.''

The Bovespa was the best performing index among the biggest markets during the first two months of 2008 as the commodity boom boosted shares of steelmakers and sugar processors such as Gerdau SA and Cosan SA Industria e Comercio. The index had relinquished its lead until yesterday as the central bank raised interest rates for the first time in three years last month to tame inflation. Brazil's main rate discounted for inflation is 7.02 percent, the highest among 52 countries tracked by Bloomberg.

Real Surges

Audrey Kaplan, who helps manage about $44 billion in stocks as a portfolio manager at Federated Investors Inc. in New York, said the firm is monitoring its ``overweight'' position in Brazil after the shares became more expensive.

The Bovespa trades for 16 times the reported earnings of companies in the index, 3.9 percent more than at the end of last year and the highest since December 2004, according to data compiled by Bloomberg. The Bovespa's price-to-earnings ratio is 6.7 percent higher than the MSCI Emerging Markets Index, the data show.

Brazil's currency, the real, has strengthened about 7 percent against the U.S. currency this year, boosting dollar- based returns on the Bovespa to 11 percent.

Unibanco, Brazil's third-largest non-government bank, jumped 12 percent yesterday, while Cyrela, the largest real estate developer, climbed 16 percent. All but two stocks advanced as the Bovespa climbed to a record 67,868.46.

`Positive Surprise'

Usinas Siderurgicas de Minas Gerais SA, the second-largest Brazilian steelmaker, and Cosan, the world's biggest sugar-cane processor, have each rallied more than 40 percent this year for the top gains in the Bovespa. U.S. steel-sheet prices rose to a record $850 a ton in April, while sugar futures have climbed 15 percent over the past year.

UBS AG strategist Pedro Batista wrote in a research note today that Brazilian equity prices don't reflect the ``positive surprise'' of S&P's upgrade. Batista reiterated his forecast that the Bovespa will climb another 25 percent by the end of 2008.

Deutsche Bank's Guilherme Paiva said the market may get a boost next week as short sellers buy shares to close out their bearish bets and European investors who ``had gone home'' before S&P's announcement purchase stocks. Brazilian exchanges are closed today for the Labor Day holiday.

Taiwan's Advance

The Taiex was the best-performing stock benchmark before the rally in Brazilian shares yesterday. Taiwan's equities gained as technology profits beat analysts' estimates and prospects for closer diplomatic ties with China boosted bank and hotel shares.

Taiwan's opposition Kuomintang party won a March presidential vote on a platform to reduce tensions with China and stoke economic expansion. Leaders from Taiwan and China held the highest-level talks in more than 50 years last month to discuss easing restrictions on travel and investment.

The Taiex trades for 16.7 times the reported earnings of companies in the index, 18 percent lower than at the end of last year, according to Bloomberg data.

China's CSI 300 Index led declines this year after a more than five-fold gain in 2006 and 2007 that pushed valuations to the highest among the 20 largest markets. The S&P 500, the benchmark for American equities, dropped 5.6 percent in the first four months of the year, while the FTSE Index fell 5.7 percent and France's CAC 40 declined 11 percent.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: May 1, 2008 11:57 EDT