Bovespa Stocks Advance on Fed Stimulus Plans, Embraer Buy Recommendation
Brazilian stocks advanced for a third day as Empresa Brasileira de Aeronautica SA jumped and the U.S. Federal Reserve said it will purchase $600 billion of Treasuries through June to boost economic growth.
Empresa Brasileira de Aeronautica SA, the world’s fourth- biggest aircraft manufacturer, climbed after Bank of America Corp. raised it to “buy” from “underperform.” Petroleo Brasileiro SA, the state-controlled oil company, jumped after Banco BTG Pactual advised buying the stock on the potential for improving reserve estimates and investor sentiment. Banco Santander Brasil SA led a rally for banks.
The Bovespa stock index advanced 0.3 percent to 71,788.88 at 2:53 p.m. New York time. Other emerging-market stocks also rallied, bringing the benchmark index to its highest level in more than two years. The real gained 0.4 percent to 1.6968 per dollar.
In emerging markets “a bubble is probably developing, but it ain’t anywhere near fully inflated levels,” Barton Biggs, the managing partner of New York-based hedge-fund firm Traxis Partners LLC and the former chairman of Morgan Stanley Asset Management, wrote in a report distributed by Itau Unibanco Holding SA. “Valuations are not extended -- yet.”
Policy makers, who said new purchases will be about $75 billion a month, “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. The central bank kept its pledge to keep interest rates low for an “extended period.”
Regional Outlook
Latin American stocks may rise a further 15 percent by the end of 2010, led by gains in banks, steelmakers and mining companies, according to a Banco Santander SA poll of investors.
Banco Santander rose 3.4 percent to 24.91 reais. Banco do Brasil SA, Brazil’s federally controlled bank, gained 2.1 percent to 34.39 reais.
President-elect Dilma Rousseff said she will reduce Brazil’s debt levels so that interest rates can fall in a “sustainable” way.
Rousseff, in a television interview yesterday, said her goal is to cut net debt to 38 percent of gross domestic product, from 42 percent today. She didn’t provide a timeframe.
“At this level there is no technical reason for Brazil’s interest rates not to converge to international levels,” Rousseff said in an interview with SBT television.
Embraer gained 2.9 percent to 12.64 reais. Bank of America raised its rating on the company, citing a dividend yield that exceeds 2 percent, more than comparable aerospace companies, and the prospects for lower costs for research and development.
Petrobras climbed 1.7 percent to 26.82 reais.
“We see relevant upside to its core assets now and the potential that in 12 months, value perception in the company increases significantly,” Gustavo Gattass, an analyst at BTG, wrote in a note to clients in which the bank reinstated its “buy” rating.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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