Bovespa Falls as Drop in Metals Pushes MMX Lower; Tim Plunges

The Bovespa stock index fell to a two-week low as Brazilian mining companies followed a drop in metal prices amid renewed concern global growth is faltering.

Iron-ore producer MMX Mineracao & Metalicos SA was the worst performer on the MSCI Brazil/Materials index, and competitor Vale SA (VALE3) dropped for a fourth day, the longest losing streak in almost two months. Tim Participacoes SA slumped the most in 11 months after a report the phone company may be blocked from selling plans to new subscribers if service doesn’t improve. Online retailer B2W Cia. Global do Varejo rallied after the central bank cut borrowing costs.

The Bovespa declined 0.3 percent to 53,420.87 at the close of trading in Sao Paulo, the lowest level since June 28. Thirty- six stocks rose today while 30 dropped. The real depreciated 0.1 percent to 2.0379 per dollar. The Bloomberg Base Metals 3-Month Price Commodity Index fell 1 percent.

“Economic data around the world keep coming in worse than expected, and unless policy makers take further steps to boost growth, the outlook is negative,” Marc Sauerman, who helps oversee about 650 million reais ($319 million) at JMalucelli Investimentos, said by phone from Curitiba, Brazil. “Lower commodities prices are particularly bad for the Bovespa. (IBOV) Some of the biggest companies depend on raw-materials exports.”

Global stocks declined as policy makers in South Korea lowered borrowing costs for the first time in more than three years, saying the economy is growing less than expected. Economies in Asia will expand less this year than previously forecast, the Asian Development Bank said today. An Australian report showed employers cut payrolls by 27,000 workers in June while economists surveyed by Bloomberg had forecast no change.

MMX Declines

Vale, the heaviest-weighted stock on the Bovespa index, fell 0.4 percent to 38.61 reais after earlier dropping 2.6 percent. MMX, the iron-ore producer controlled by billionaire Eike Batista, lost 4.6 percent to 5.61 reais.

Tim Participacoes, Brazil’s second-biggest cell-phone operator, tumbled 7.5 percent to 9.80 reais, the worst performer on the Bovespa, after O Estado de S.Paulo reported that Brazil Communications Minister Paulo Bernardo said the company may be blocked from selling new contracts if it fails to improve operations. Bernardo said Tim may be required to sign an agreement with regulators pledging better service, according to O Estado.

Tim said in a regulatory filing today it’s unaware of any possible restriction on the company’s sales. The carrier said in the statement it “strictly” follows the directions provided by Brazil’s regulator and is keeping its investment plan of about 3 billion reais per year.

Rate Cut

An official at the Communications Ministry didn’t return a phone call seeking comment.

Homebuilder Rossi Residencial SA sank 7 percent to 3.99 reais after reporting that its contracted sales fell 24 percent to 682 million reais in the second quarter from a year earlier.

Some stocks linked to domestic demand advanced a day after Brazil lowered its target lending rate for the eighth straight time. The central bank’s board, led by President Alexandre Tombini, cut the Selic by a half-percentage point to a record low 8 percent.

“Lower interest rates may help boost consumption, which is good for some industries that depend more heavily on domestic demand, but it may not be enough to strengthen the economy as a whole,” Mirela Rappaport, who helps manage 250 million reais at Investport in Sao Paulo, said in a phone interview. “The industrial sector would still need lower taxes and a weaker currency to post a sustained recovery.”

B2W Cia. Global do Varejo gained 2.9 percent to 6 reais. Cia. Hering, a clothing retailer, climbed 2.5 percent to 37.50 reais.

Bovespa Valuation

The Bovespa has dropped 22 percent since this year’s high on March 13 as the debt crisis in Europe worsened and growth in Brazil faltered. The index trades at 9.8 times analysts’ earnings estimates for the next four quarters, compared with 9.9 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 5.83 billion reais in stocks in Sao Paulo yesterday, which compares with a daily average of 7.31 billion reais this year through July 10, according to data compiled by 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

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