Bovespa Drops as Batista’s Companies Sink After OGX Downgrades

The Bovespa (IBOV) index dropped as companies owned by billionaire Eike Batista tumbled after his oil unit OGX Petroleo & Gas Participacoes SA was lowered by firms including JPMorgan Chase & Co.

MMX Mineracao & Metalicos SA and LLX Logistica SA (LLXL3), Batista’s mining company and port developer, were the worst performers on the gauge. OGX was cut to the equivalent of sell at Banco Santander SA and Citigroup Inc. and hold at JPMorgan, Banco Itau BBA SA and Banco Bradesco SA’s brokerage unit after reporting on March 11 a decline in oil production.

The Bovespa fell 0.2 percent to 58,078.08 at 12:25 p.m. in Sao Paulo. Thirty-seven stocks sank on the measure while 28 advanced. The real appreciated 0.1 percent to 1.9620 per U.S. dollar. OGX fell 2.3 percent to 2.55 reais, extending this week’s slump to 18 percent.

“What happened with OGX is something that’s not affecting just the company itself,” Rodolfo Amstalden, an analyst at consulting firm Empiricus Research, said by phone from Sao Paulo. “It’s a sign of difficulties Eike is facing in all his ventures.”

MMX dropped 4.5 percent to 3.60 reais. LLX fell 3.5 percent to 2.48 reais. OGX’s production at its three offshore wells in the Campos Basin fell 14 percent to a combined 11,300 barrels a day in February, the company said this week.

Embraer Rally

The Bovespa earlier gained as much as 0.4 percent as plane builder Embraer SA (EMBR3) rose to a five-year high after reporting sales that beat estimates. It rose 1.8 percent to 17.45 reais.

Oil and gas company HRT Participacoes em Petroleo SA rose 1.4 percent to 3.72 reais as regulators extended the oil and gas company’s license to explore blocks in the Amazon’s Solimoes basin for four years.

The Bovespa has dropped 8.3 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index (MXBRIC) of shares in Brazil, Russia, India and China has slid 3.9 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.8 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for the MSCI Emerging Markets Index (MXEF) of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 6.41 billion reais yesterday, which compares with a daily average of 7.62 billion reais this year through March 11, 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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