Ibovespa Gains as Commodities Advance Pushes MMX Higher

The Ibovespa gained for a fifth day, the longest winning streak in seven months, as speculation central banks will move to spur growth sent commodities higher, boosting the outlook for Brazilian raw-material producers.

Petrochemicals producer Braskem SA (BRKM5) rallied to the highest since September after JPMorgan Chase & Co. and Citigroup Inc. both raised their recommendations to the equivalent of buy. Sugar-cane processor Cosan SA Industria & Comercio (CSAN3) rose to a one-month high, and mining companies Vale SA (VALE5) and MMX Mineracao e Metalicos SA followed metals higher.

The Ibovespa added 0.2 percent to 54,984.23 at the close of trading in Sao Paulo. Thirty-seven stocks rose on the measure while 28 fell. The real strengthened 0.6 percent to 2.0103 per dollar. The Standard & Poor’s GSCI index of 24 raw materials advanced 1.2 percent as speculation mounted that the European Central Bank will cut its key interest rate to a record next week.

“Economic data in Europe have been coming in a bit weaker, which spurs bets that the central bank may lower the benchmark lending rate to shore up growth,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview. “These bets are fueling a rebound in commodities, which is positive for Brazilian producers.”

European policy makers have indicated they may consider a rate cut at their May 2 meeting. Central bank President Mario Draghi said April 19 he hasn’t seen any improvement in economic data in the region as a whole, after hinting at the beginning of the month he might lower borrowing costs if the recovery faltered. Executive Board member Joerg Asmussen said a day later that it could lower rates if data show a need for it.

MMX rose 7.6 percent to 2.13 reais. Vale gained 0.7 percent to 32.10 reais.

Tax Breaks

Cosan advanced 1 percent to 46.51 reais, extending a two- day gain to 4.2 percent, the biggest for such a period since January. Finance Minister Guido Mantega said yesterday that Brazil will give tax deductions and extend low-cost credit to mills in a bid to lift ethanol output and reduce fossil-fuel imports.

President Dilma Rousseff’s administration will also lower some taxes on raw materials used in the chemical industry, spurring Citigroup to raise its recommendation for Braskem to buy. The shares jumped 1.1 percent to 16.35 reais today.

“Tax cut brings relevant upside” for Braskem, Citigroup’s analysts Pedro Medeiros and Fernando Valle wrote in a note to clients. “This tax incentive helps Braskem’s deleveraging story and adds significant profitability in the next few years.”

Alupar Debut

Alupar Investimento SA (ALUP11) tumbled 5.4 percent to 17.50 reais in its Sao Paulo trading debut. The Brazilian electricity and transmission company said on April 22 it’s raising 851 million reais by selling 46 million units for 18.5 reais each, at the low end of its target range.

The Ibovespa (IBOV) has retreated 13 percent from this year’s peak 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 lost 7.8 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.3 times analysts’ earnings estimates for the next four quarters, compared with 10.5 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 8 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.64 billion reais this year through April 22, 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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