The Bovespa index rose after Brazil’s central bank signaled that borrowing costs will remain at a record low this year even as inflation exceeds targets.
Homebuilder PDG Realty SA led gains among companies that sell in the domestic market. Cia. Siderurgica Nacional (CSNA3) SA slumped to its lowest price of the month, posting the biggest decline on the index, after Dow Jones reported it offered to pay $3.8 billion for ThyssenKrupp AG’s plants in the Americas.
The Bovespa advanced 0.2 percent to 61,899.71 at 10:49 a.m. in Sao Paulo. The real strengthened 0.1 percent to 2.0410 per dollar after the central bank board kept the benchmark interest rate at 7.25 percent for a second straight meeting yesterday, matching the forecast of all 56 analysts surveyed by Bloomberg. The best strategy is to keep monetary conditions unchanged for a “prolonged period,” policy makers said in a statement accompanying the unanimous decision.
“Lower rates should specially favor companies that depend on credit to sell,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil. “Investors understand that the central bank is concerned about inflation and wonder what else it could do to try to boost growth.”
Inflation exceeded economists’ estimate for the sixth straight month in December, ending the year at 5.84 percent, higher than the bank’s 4.5 percent target for the 28th straight month. Brazil’s gross domestic product expanded 1 percent in 2012, according to the median estimate of 30 economists surveyed by Bloomberg. That’s about half the pace of the U.S. and Japan, according to separate surveys.
PDG rose 1.6 percent to 3.25 reais. CSN slumped 4 percent to 11.94 reais.
The Bovespa (IBOV) entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its gain to 18 percent.
Brazil’s benchmark equity gauge trades at 11.5 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 5.77 billion reais in stocks in Sao Paulo yesterday, which compares with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.
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