Bovespa Gains as Homebuilders Climb on Lower Inflation Forecast

Brazilian stocks rose, sending the Bovespa index higher for a second day, as Gafisa SA (GFSA3) led gains by homebuilders after economists cut estimates for inflation for a sixth straight week.

Gafisa, Brazil’s third-biggest homebuilder by revenue, was the best performer on the BM&FBovespa Real Estate Index, which rebounded from a one-week low on bets smaller increases in consumer prices will leave room for policy makers to continue cutting interest rates. Larger rival PDG Realty SA Empreendimentos & Participacoes (PDGR3) advanced after it was raised to “overweight” from “equalweight” at Morgan Stanley.

The Bovespa climbed 0.8 percent to 59,082.88 at the close of Sao Paulo trading. Fifty-one stocks rose on the gauge, while 17 sank. The real advanced 1.3 percent to 1.8332 per U.S. dollar.

“The outlook for Brazil is still positive,” Alvaro Bandeira, a director at Ativa Corretora brokerage, said in an interview from Rio de Janeiro. “The economy may not grow as fast as the government desires, but it’s still growing. And signs that inflation is slowing confirm bets on lower interest rates.”

Consumer prices in Brazil will increase 5.31 percent in 2012, according to the median forecast in a Jan. 6 central bank survey of about 100 economists published today. That compares with a forecast of 5.32 percent the previous week. Economists expect policy makers to cut the benchmark interest rate half a percentage point to 10.5 percent at their Jan. 17-18 meeting, and to 9.5 percent by the end of the year, the survey found.

Brazil’s IGP-DI index of wholesale, construction and consumer prices dropped 0.16 percent in December from November, the Getulio Vargas Foundation said on its website today. The median estimate among 17 analysts surveyed by Bloomberg was for a 0.17 percent decline.

Economic Outlook

Economists held their estimate for economic growth this year at 3.3 percent, according to the survey. President Dilma Rousseff’s administration targets growth of 5 percent in 2012.

Gafisa advanced 2.7 percent to 4.51 reais. PDG Realty rose 2.1 percent to 6.44 reais. The BM&FBovespa Real Estate Index (IMOBBV) climbed 0.6 percent.

Hypermarcas SA (HYPE3), the maker of more than 180 consumer products, rose 1.4 percent to 10.39 reais after earlier slumping as much as 5 percent. Hypermarcas said in a regulatory filing yesterday it is unaware of any formal proposal from investors seeking to join the company’s controlling block. Shares rose to a three-month high on Jan. 6 on speculation Banco BTG Pactual SA is in talks to buy a stake.

Bovespa’s Valuation

The Bovespa has gained 21 percent from a two-year low on Aug. 8 as interest-rate cuts in Brazil and signs of progress in solving Europe’s debt crisis buoyed demand for equities. The gauge trades at 9.2 times analysts’ earnings estimates, which compares with the ratio of 9.5 for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 4.56 billion reais ($2.49 billion) in stocks in Sao Paulo on Jan. 6, data compiled by Bloomberg show. That compares with a daily average of 6.49 billion reais in 2011, according to data from the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net

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