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Bovespa Stock Index Advances as Batista's Companies Rally for Second Day
The Bovespa stock index gained for a second day as homebuilders climbed after Rossi Residencial SA said profit doubled and Tam SA surged after announcing a combination with Chile’s Lan Airlines SA.
OGX Petroleo e Gas Participacoes SA, the oil company controlled by Batista, jumped 2.3 percent after saying yesterday it found gas in an onshore well in the Parnaiba basin. Rossi increased 3.7 percent. Tam led gains on the Bovespa index.
The Bovespa index increased 0.5 percent to 66,264.43. Thirty-three stocks rose while 31 fell. The measure is down 2.7 percent for the week. It rose yesterday, halting a four-day drop, as metals prices increased. The real slipped 0.1 percent to 1.7714 per dollar today.
“Earnings haven’t been fantastic but not bad either,” said Marcelo Mesquita, a partner at Rio de Janeiro-based Leblon Equities Gestao de Recursos Ltda. and former head of Brazil equities strategy for UBS AG. “But I think 2011 will be a good year.”
Tam jumped 28 percent to 36.20 reais, the biggest gain since December 2004. After markets closed, Tam SA said in a regulatory filing that Lan Airlines SA offered to exchange 0.9 of its shares for the shares of the Brazilian company, according to a merger agreement. Tam shares will be delisted after the deal is concluded, said the statement sent to the Brazilian securities regulator.
‘Positive’ Transaction
The deal is “positive” for the carriers and will help them compete with rivals, said Ed Kuczma, emerging markets analyst at Van Eck Associates, which manages $21 billion in New York including Tam shares.
“They’ll have vast economies of scale between the two of them and will be able to dilute costs over a higher base of assets and increase margins,” Kuczma said in a phone interview from New York. “They could drive prices lower.”
Rossi jumped 3.7 percent to 15.55 reais, pushing the BM&FBovespa Real Estate index up 1.4 percent. PDG Realty SA Empreendimentos & Participacoes, Brazil’s third-biggest homebuilders by revenue, rose 3.7 percent to 17.47 reais. Shopping center operator Iguatemi Empresa de Shopping Centers SA climbed 2 percent to 32.07 reais.
OGX gained for a second day after Chief Executive Officer Paulo Mendonca said he expects a “significant” increase in its potential oil and natural-gas resources after making a new discovery in Brazil. OGX wells in the onshore Parnaiba Basin in northern Brazil may hold 10 trillion to 15 trillion cubic feet of natural gas, Batista said yesterday. OGX jumped 2.3 percent to 19.18 reais, extending this year’s gain to 12 percent.
BR Properties SA jumped the most in two weeks after saying it bought properties in Rio de Janeiro, in partnership with Banco BTG Pactual SA, for 680 million reais ($384 million).
BR Properties gained 1.1 percent to 13.95 reais.
Debt Sales
Brazilian President Luiz Inacio Lula da Silva is selling record amounts of debt as speculation increases that the central bank may be done raising interest rates this year. Traders are paring bets on interest-rate increases as a slowing expansion in Brazil and overseas helps push inflation to a six-month low. Futures trading shows investors expect central bank President Henrique Meirelles to lift the benchmark lending rate to about 11 percent by year-end from 10.75 percent today. On July 8, they expected a year-end rate of 12 percent.
Emerging-market consumer stocks are posting the only gains among 20 industry groups since MSCI Inc.’s gauge of global shares peaked in April as investors bet shoppers from Moscow to Sao Paulo will provide a haven amid signs the global recovery is faltering.
Rising Incomes
Investors are counting on rising incomes in developing nations to boost demand for everything from food and cigarettes to designer shoes and cars even as increased saving rates in the developed world pare spending.
Emerging nations will account for 93 percent of the global “middle class” by 2030 -- up from 56 percent in 2000 -- and half of a projected 800 million new middle-income consumers will come from India and China, according to Citigroup Inc.
The Bovespa index trades for 13.1 times analysts’ 2010 earnings estimates, compared with 12.3 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 16.7 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 14.8 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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