Bovespa Rises on Brazil Rate Outlook, Commodities Gain

(Corrects to say China’s purchasing managers’ index rose for a third month in February in the third paragraph.)

The Bovespa index headed for a 10- month high as bets for lower Brazilian borrowing costs lifted consumer stocks and raw material-producers followed commodities higher after a report showed manufacturing expanded in China.

Steelmaker Usinas Siderurgicas de Minas Gerais SA rose the most among raw-material producers as metals prices increased. Localiza Rent a Car SA, Latin America’s biggest car-rental company, led gains by companies that depend on domestic consumption.

The Bovespa climbed 1.3 percent to 66,654.5 at 1:35 p.m. in Sao Paulo. A close at that level would be the highest since April 26. Fifty-six stocks advanced, while 11 fell. The real strengthened 0.4 percent to 1.7115 per U.S. dollar. Industrial metals advanced, with the Bloomberg Base Metals 3-Month Price Commodity Index (CMDIBAS3) rising 0.9 percent, after China’s purchasing managers’ index climbed for a third month in February.

“China’s economic activity should remain strong, at least in the short term, sustaining the demand for Brazilian commodities,” Marc Sauerman, who helps oversee about 650 million reais ($380 million) at JMalucelli Investimentos in Curitiba, Brazil, said by phone. In Brazil, “policy makers have indicated they’ll keep cutting rates aggressively, which should continue to push the Bovespa higher.”

Usiminas, as Usinas Siderurgicas is known, climbed 2.4 percent to 11.93 reais.

Interest-Rate Outlook

In the interest-rate futures market, yields on most contracts fell. The yield on the contract due in January 2013 slid 10 basis points, or 0.1 percentage point, to 9.13 percent.

Brazil announced today it will tax foreign loans and bonds by local companies that mature in three years or less in a bid to stem the currency’s appreciation, which could be a sign policy makers may take other measures, including lowering borrowing costs, to curb a rally in the real, said Luciano Rostagno, chief strategist with Banco WestLB do Brasil SA.

“There’s speculation the central bank may use rate cuts to help push the real” lower, Rostagno said by phone from Sao Paulo. The tax increase announced today “reinforces the speculation.”

Localiza rose 3.3 percent to 32.76 reais. BR Malls gained 3.2 percent to 22.72 reais.

Overseas demand for Brazil’s commodities, combined with interest-rate cuts, will keep pushing investors into Brazilian stocks, said Pedro Bastos, Latin America head for HSBC Holdings Plc’s wealth management division. The Bovespa index will reach 75,000 by year-end, surpassing the record of 73,516 set in 2008, Bastos said in a phone interview from Sao Paulo yesterday.

Relative Value

The Bovespa has advanced 17 percent this year, after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The gauge trades at 10.6 times analysts’ earnings estimates, compared with a 10.6 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 7.86 billion reais in stocks in Sao Paulo yesterday, data compiled by Bloomberg show. That compares with a daily average of 6.97 billion reais this year through Feb. 13, 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 at papadopoulos@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.