Bovespa Extends Weekly Jump as Commodities Boost Vale

The Bovespa (IBOV) index rose for a second weekly rally as higher commodity prices supported by China’s manufacturing growth lifted producers and Brazil’s economy expanded at a faster pace in October than forecast.

Iron-ore producer Vale SA, whose top export market is China, surged to a five-month high and contributed the most to the index’s advance. Braskem SA, Latin America’s largest petrochemicals producer, rebounded from a three-week low. Materials and energy stocks were among the best performers among 10 industry groups tracked by MSCI Inc.

The Bovespa index, the benchmark for Brazilian stocks, rose 0.5 percent to 59,604.92 at close in Sao Paulo, extending this week’s advance to 1.9 percent. The real was little changed at 2.0852 per U.S. dollar. Brazil’s economic activity rebounded in October, and a report in China signaled manufacturing is expanding at a faster pace this month.

“Things in China seem to be improving, which is good for companies such as Vale and other commodities producers,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said by phone. “The economy is still poised for much faster growth next year when compared to 2012.”

Brazil’s seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.36 percent in October after declining 0.52 percent in the prior month, the central bank said today in a report posted on its website. Analysts expected a 0.30 percent increase, according to the median forecast of economists surveyed by Bloomberg. The gauge rose 4.96 percent from a year earlier.

Stimulus Measures

President Dilma Rousseff’s administration has expanded stimulus measures for companies and consumers to jump-start Brazil’s $2.5 trillion economy, which grew at half the pace of analysts’ forecasts in the third quarter. Last week government officials cut taxes for the construction industry and announced plans to attract billions of reais in port investments.

“Growth will accelerate significantly next year as the government has introduced powerful fiscal and monetary stimuli and still has leeway to step up its efforts to boost growth,” Jose Carlos de Faria, a Deutsche Bank AG economist, said in a research note e-mailed to clients.

Homebuilder Gafisa SA rose 0.6 percent to 4.72 reais, leading gains by stocks linked to domestic demand.

Braskem Advance

Braskem added 0.7 percent to 13.09. Vale rose 3.2 percent to 39.75 reais. The Standard & Poor’s GSCI index of 24 raw materials advanced 0.9 percent.

Fibria Celulose SA, the world’s largest pulp producer, tumbled 0.4 percent to 22.09 reais after saying Brazil’s tax authority ordered it to pay 556 million reais in taxes and 1.1 billion reais in fines.

Eletropaulo Metropolitana SA, the Brazilian unit of AES Corp., slumped 5.5 percent to 13.23 reais after saying in a regulatory filing it was ordered by a court to pay 1.3 billion reais to Centrais Eletricas Brasileiras SA for an unpaid loan arranged in 1986, when the company was still controlled by the state of Sao Paulo. Eletropaulo said it will appeal.

Eletrobras, as Centrais Eletricas is known, gained 1.5 percent to 9.74 reais.

Bovespa Valuation

The Bovespa index has climbed 14 percent from this year’s low in June as stimulus from central banks around the world eased concerns about an economic slowdown. The index trades at 11 times analysts’ earnings estimates for the next four quarters, in line with the ratio for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 7.68 billion reais in stocks in Sao Paulo today. That compares with a daily average of 7.26 billion reais this year through Dec. 12, 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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