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Bovespa Falls on Speculation Investors Preparing for Petrobras Share Sale
The Bovespa stock index fell on speculation investors will sell shares of Brazil’s largest companies to buy an equity offering from Petroleo Brasileiro SA after an agreement with the government signaled the company may sell more stock than analysts had estimated.
Petrobras, Brazil’s state oil producer, surged after reaching a deal with the government on a planned oil-for-shares swap following two weeks of negotiations. Vale SA, the world’s largest iron-ore producer, dropped after its rating was cut at RBC Capital Markets. Banco Santander Brasil SA, the Brazilian unit of Spain’s biggest bank, fell the most in a week, leading declines among Brazil’s largest lenders.
“There are a lot of things that still have to be defined about the share sale and the price was a bit higher than expected,” said Eduardo Roche, who helps oversee 3 billion reais ($1.7 billion) at Banco Modal SA in Rio de Janeiro. “It makes it more possible that their September deadline for the share sale could be reached. There could be an overhang.”
The Bovespa fell 0.4 percent to 66,808.08 at 4:23 p.m. New York time. Fifty stocks dropped on the index while 16 gained. The real strengthened 1 percent to 1.7291 per dollar.
Brazil’s benchmark stock gauge rose yesterday the most in three months after commodities gained following faster-than- forecast manufacturing growth in China and the U.S., Brazil’s biggest trading partners.
Petrobras Swap
Petrobras agreed to pay the Brazilian government $42.5 billion in new stock for the right to develop 5 billion barrels of offshore oil reserves. The value set for the reserves will determine how much new stock Petrobras must offer minority investors in a related public offering to raise funds for a $224 billion plan to develop offshore fields and boost refinery capacity.
“It could have an overhang on other stocks, a lowering of positions to participate in Petrobras, from institutional investors mainly,” said Max Bueno, an analyst at Sao Paulo- based Spinelli Corretora.
Petrobras will pay an average of $8.51 a barrel for the reserves, according to a regulatory filing yesterday. The price is more than the $7.50 per barrel estimated by UBS AG analyst Lilyanna Yang and Ted Harper, who helps manage about $6.8 billion at Frost Investment Advisors in Houston. A price of $7.50 a barrel or higher would force Petrobras to sell more shares to the government than investors expect and dilute earnings, Yang said in an Aug. 11 report.
Largest Deposit
Petrobras plunged 26 percent this year through yesterday. The stock gained 2.1 percent to 27.60 reais today.
Santander dropped 2.2 percent to 22 reais. Vale tumbled 1 percent to 42.85 reais after RBC lowered its rating to “sector perform” from “outperform.”
Brazil discovered an iron-ore deposit that may be the world’s largest, topping Vale’s Carajas mine, a government official said today. The new deposit in Mato Grosso state may contain 11.5 billion metric tons of ore with 41 percent iron content, state Secretary Pedro Nadaf said. State and federal officials haven’t yet determined if the deposit is commercially viable, he said.
The Bovespa index trades for 12.5 times analysts’ 2010 earnings estimates, compared with 11.9 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 15.5 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 14.4 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 reporters on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net; To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net
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