(Corrects fund manager name in fourth paragraph.)
Brazil’s Bovespa stock index gained
for a ninth day, the longest stretch since 2003, after the
central bank said economic growth may have slowed to sustainable
levels and inflation eased for a second month.
Natura Cosmeticos SA, Brazil’s biggest cosmetics maker,
climbed to a record after Banco BTG Pactual SA raised its share-
price forecast. Rossi Residencial SA surged, helping the
benchmark real-estate index reach the highest value in two years
amid speculation borrowing costs will rise at a slower pace.
Redecard SA, the nation’s second-largest card-payment processor,
rose for the first time in eight sessions ahead of its earnings
report tomorrow.
The Bovespa index advanced 0.2 percent to 66,953.83 at the
close of trading in Sao Paulo at 4 p.m. New York time. Thirty-
eight stocks dropped while 26 gained. The real strengthened 0.6
percent to 1.7593 per dollar.
“You’re once again seeing a stronger interest in Brazil,”
said Paolo Di Sora, who helps manage $1.3 billion at M. Safra &
Co. in Sao Paulo. “Earnings season is turning out very solid,
showing a strong growth trajectory, for example in retail
companies and banks, which are reporting growing credit and
falling default rates.”
Lower Growth
The Bovespa rose yesterday as financial shares rallied,
overshadowing declines by Tele Norte Leste Participacoes SA and
its unit Telemar Norte Leste SA, Brazil’s biggest phone company.
The firms may each raise as much as 12 billion reais ($6.8
billion), sparking concern earnings will be diluted, as part of
Portugal Telecom SGPS SA’s agreement to buy a 22 percent stake
in Telemar.
The index earlier today lost as much as 0.3 percent as Tele
Norte Leste’s voting shares plunged 8.1 percent to 32.36 reais,
extending a two-day drop to 23 percent. Telemar, known as Oi,
tumbled 5 percent to 45.60 reais and has lost 13 percent in the
past two days.
Brazil’s central bank said economic growth may have
moderated since the start of the year, helping to contain
inflation risks. A slowing Chinese economy and doubts about the
strength of the U.S. recovery are helping to fight price gains,
the bank said today in the minutes of its July 20-21 meeting.
A drop in the inflation rate and evidence Latin America’s
biggest economy is slowing prompted the central bank to reduce
the pace of interest rate increases last week. Policy makers
increased the Selic rate by 50 basis points to 10.75 percent,
surprising 48 of 51 analysts surveyed by Bloomberg who expected
them to lift it by 75 basis points as in its previous meeting.
Inflation Slows
Brazil’s monthly inflation as measured by the IGP-M price
index was 0.15 percent in July, the Getulio Vargas Foundation
said in a statement on its website. It was the second straight
month that Brazil’s broadest price index slowed, after falling
to 0.85 percent in June from 1.19 percent in May.
Natura gained 4.4 percent to 44.57 reais after BTG Pactual
raised its 12-month share-price forecast by 9.8 percent to 45
reais.
“We remain hard pushed to find another consumer story with
a more compelling business model,” BTG Pactual analysts Fabio Monteiro and Thiago Duarte wrote in a note to clients today. The
Rio de Janeiro-based bank reiterated its “neutral” rating,
citing a “hefty premium.” Natura trades at 25 times reported
earnings, according to weekly data compiled by Bloomberg.
Homebuilders Advance
Rossi, Brazil’s sixth-biggest homebuilder by revenue, rose
3.4 percent to 15.94 reais while Cyrela Brazil Realty SA
Empreendimentos e Participacoes, the largest, increased 4.2
percent to 24.60 reais. The BM&FBovespa Real Estate Index
advanced 0.7 percent to the highest level since May 2008.
Redecard gained 2.9 percent to 26.01 reais. The company may
report second-quarter net income rose 4.6 percent to 358.9
million reais, according to the average estimate in a Bloomberg
survey of eight analysts.
The Bovespa index trades for 12.9 times analysts’ 2010
earnings estimates, compared with 12.1 times for the MSCI
Emerging Markets Index of 21 developing nations’ stocks and 16
times for Mexico’s IPC index, according to weekly data compiled
by Bloomberg. The Bovespa trades at 15.6 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 Cuadros in Sao Paulo at
acuadros@bloomberg.net
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