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Bovespa Stock Index Advances as Earnings Boost Economic Recovery Outlook
The Bovespa stock index rose for a fifth day, capping its biggest weekly gain since May 2009, as better-than-estimated earnings in the U.S. boosted confidence in the global economic recovery.
Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s biggest homebuilder by revenue, climbed 2.4 percent after reporting that its exclusive stake of second-quarter preliminary contracted sales increased 77 percent. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, climbed 1.4 percent as metals prices increased after companies from Ford Motor Co. to Verizon Communications Inc. reported earnings that beat analysts’ estimates.
“It was a very strong week with good results coming in the U.S., and then people began pricing in lower increases from the central bank,” said Felipe Casotti, who helps manage the equivalent of $346 million in assets at Maxima Asset Management in Rio de Janeiro. “Today the markets are stable.”
The Bovespa stock index added 0.9 percent to 66,322.99, after earlier falling as much as 0.5 percent. Forty-four stocks rose on the index while 19 fell. The BM&FBovespa Small Cap index gained 0.7 percent, while the real gained 0.2 percent to 1.7553 per U.S. dollar.
The Bovespa climbed 6.4 percent this week after commodities rallied and policy makers slowed the pace of interest-rate increases, signaling they may stop raising borrowing costs.
Markets around the world rallied this week as earnings bolstered the outlook for the global economic recovery. Of the 149 companies on the U.S. Standard & Poor’s 500 Index that have reported earnings since July 12, about 85 percent have beaten forecasts for earnings per share, according to Bloomberg data.
Fund Inflows
Latin American equity funds posted back-to-back weeks of inflows for the first time since early April, the EPFR Global research firm said today.
Cyrela gained 2.4 percent to 23.10 reais. The company’s exclusive stake of the sales was 1.1 billion reais ($626.5 million), up 77 percent compared with the same period last year.
Brazil’s government is considering tax breaks to stimulate long-term lending for infrastructure investment, helping to reduce the lending burden on the state development bank, Finance Minister Guido Mantega said.
Cut Income Taxes
Mantega, in an interview in Sao Paulo, said that among the measures being considered is to cut income taxes for investment in debentures and to develop a secondary market for them. He said the measures will be ready before President Luiz Inacio Lula da Silva leaves office in January.
Usiminas gained 1.4 percent to 53.25 reais. The Bloomberg Base Metals 3-Month Price Commodity Index advanced 0.7 percent to the highest level in two months.
Natura Cosmeticos SA gained for a second day, rising 2.1 percent to 41.05 reais. Brazil’s largest cosmetics maker said July 21 second-quarter profit increased 14 percent from a year earlier on growing consumer demand.
The fastest economic growth since 1995 and the largest tumble in equity valuations among emerging markets still can’t persuade the world’s biggest investors that Brazilian stocks are cheap.
Templeton Asset Management Ltd.’s Mark Mobius is concerned a flood of shares led by Petroleo Brasileiro SA’s planned $25 billion offering in September may limit gains after the Bovespa index dropped 3.3 percent this year. Baring Asset Management expects increased government control over the economy from Dilma Rousseff, the chosen successor of President Luiz Inacio Lula da Silva. Schroders Plc and Prudential Financial Inc. say growth has peaked as interest rates rise.
The Bovespa index trades for 11.8 times analysts’ 2010 earnings estimates, compared with 11.6 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 15.3 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 13.4 times the reported profits of its companies after fetching 25.5 times in November, the most in almost six years, weekly data show.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net
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