Bovespa Index Advances After China Manufacturing Report

The Bovespa (IBOV) index rose for the second time in three days as homebuilders rallied after a report showing inflation slowed in November spurred speculation Brazil will be able to keep borrowing costs at a record low.

MRV Engenharia e Participacoes SA was the best performer on the BM&FBovespa Real Estate Index (IMOBBV), which climbed to a one-week high. Banco Bradesco SA rose to the highest level since Sept. 24 after it announced a partnership with cellular phone operator Claro for mobile payments.

Brazil’s benchmark equity index added 0.3 percent to 56,436.97 at the close of trading in Sao Paulo. Thirty-six stocks rose on the Bovespa while 31 declined. The real was little changed at 2.0989 per U.S. dollar after weakening yesterday to a three-year low. Brazil’s swap rates fell on most contracts after a report showed consumer prices increased at a slower pace in the month through mid-November.

“Inflation seem to be coming in more or less in line with what the central bank expects, which supports the idea that interest rates won’t rise in the near future,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro.

The IPCA-15 price index gained 0.54 percent, the national statistics agency reported today. While it exceeded the 0.51 percent median estimate of analysts surveyed by Bloomberg, it was lower than the previous reading of 0.65 percent. Brazil’s central bank President Alexandre Tombini said in a congressional hearing today inflation will converge to the bank’s 4.5 percent target in the third quarter of 2013.

MRV gained 2.8 percent to 10.60 reais. PDG Realty SA rose 1.4 percent to 2.85 reais while Cyrela Brazil Realty SA Empreendimentos e Participacoes added 1.9 percent to 17.48 reais.

Fuel Prices

Bradesco advanced 1.1 percent to 34.55 reais, the highest in almost two months.

State-controlled oil producer Petroleo Brasileiro climbed 0.2 percent to 18.65 reais. Brazil may allow the company to raise fuel prices early next year, said a government official who asked not be identified because discussions aren’t public.

Chief Executive Officer Maria das Gracas Foster told reporters in Brasilia yesterday that while she expects fuel prices to rise, there is no schedule for an increase.

Preferred shares of state-controlled power utility Centrais Eletricas Brasileiras SA (ELET6) tumbled 6.9 percent to 7.3 reais, extending its monthly plunge to 55 percent, amid concern rate cuts ordered by the government will erode earnings.

‘Stay Away’

Brazil’s plan to reduce electricity costs by as much as 28 percent will almost erase earnings before interest, taxes, depreciation and amortization next year, Chief Financial Officer Armando Casado de Araujo said Nov. 19. The government is offering Eletrobras 14 billion reais in cash as compensation, less than half the 30 billion reais the company had said it expected to receive.

“With all the changes the government is trying to implement in the electrical sector, most people are choosing to stay away from those stocks,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores in Sao Paulo, said in a phone interview.

The Bovespa’s Electric Energy index of 15 power utilities dropped 0.4 percent to a two-year low.

The benchmark Bovespa index has climbed 7.5 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted demand for equities.

Trading volume was 3.5 billion reais in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.2 billion reais this year through Nov. 19, 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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