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Bovespa Stock Index Declines to Five-Week Low on Global Economic Concerns
The Bovespa stock index fell to its lowest level in five weeks as concern global growth is weakening eroded demand for higher-yielding emerging-market assets.
Vale SA, the world’s biggest iron ore producer, led a drop for raw-materials producers as commodities prices fell. Homebuilder Rossi Residencial SA tumbled 3.4 percent, leading a decline in real-estate companies. Lojas Renner SA, the best- performing stock on the Bovespa this year, tumbled after Credit Suisse Group AG cut the retailer to “neutral” from an “outperform” rating.
“The market is looking closely at the economic recovery, mostly the U.S. but also Europe,” said Eduardo Roche, who helps oversee 3 billion reais ($1.7 billion) at Banco Modal SA in Rio de Janeiro. “There’s the valid point that industries that are insulated from demand abroad shouldn’t be falling, but these are also the companies that have gone up a lot too.”
The Bovespa index dropped 0.5 percent to 64,803.43, the lowest level since July 21. The BM&FBovespa Small Cap index fell 0.8 percent to 1,268.03. The real gained 0.4 percent to 1.7640 per dollar.
Orders for durable goods in the U.S. increased less than forecast in July, a sign one of the few remaining bright spots in the world’s largest economy is cooling. Ireland’s credit rating was cut one step by Standard & Poor’s to AA-, the lowest since 1995, on concern the rising cost of supporting the country’s struggling banks will swell the budget deficit.
Vale fell 1 percent to 40.93 reais.
Rossi, which jumped 31 percent the past three months, dropped 3.4 percent to 15.51 reais. Lojas Renner, which has gained 39 percent this year, fell 3.4 percent to 54.57 reais.
The Bovespa index trades for 12.6 times analysts’ 2010 earnings estimates, compared with 12 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 16.5 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 14.7 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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