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Ibovespa Falls as Brazil Stock Valuation Reaches Four-Month High

The Ibovespa retreated from its strongest level since March amid speculation the gains that pushed valuations on the Brazilian stock benchmark to a four-month high may have been excessive.

Grupo BTG Pactual (BBTG11), the bank led by the billionaire Andre Esteves, fell after its first-quarter earnings trailed analysts’ estimates. The MSCI Brazil/Energy Index slid the most among 10 industry groups as Petroleo Brasileiro SA, the state-controlled oil producer also known as Petrobras, dropped from its highest price since December. OGX Petroleo & Gas Participacoes SA sank the most on the benchmark after erasing a 9.7 percent gain.

The Ibovespa declined 0.8 percent to 55,804.80 at the close of trading in Sao Paulo. Thirty-eight stocks fell on the gauge while 31 advanced. The index traded yesterday at 12.5 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show. The real climbed 0.1 percent to 2.0054 per dollar today.

“Stocks linked to domestic consumption, which in theory have the best outlook, aren’t cheap,” Wagner Salaverry, a partner at Quantitas Asset Management, which oversees 12 billion reais of assets, said by phone from Porto Alegre, Brazil. “Bigger companies such as Petrobras trade at lower valuations for a reason. There are real concerns about them.”

Petrobras fell 1.6 percent to 20.29 reais. BTG dropped 1.1 percent to 33.60 reais. OGX, the oil company controlled by Brazilian billionaire Eike Batista, sank 9.7 percent to 1.76 reais.

Bradesco Gains

Voting shares of lender Banco Bradesco SA added 1.5 percent to 34.75 reais, the most on the MSCI Brazil/Financials Index, which advanced for a second day.

The Ibovespa earlier gained as much as 1 percent as some commodities producers rallied after a report showing that China imported more goods than estimated last month, boosting the outlook for the Brazil’s top trading partner.

Vale SA, the world’s largest iron-ore producer, rose for a fourth day, gaining 0.2 percent to 33.12 reais, the highest since April 9. Competitor MMX Mineracao & Metalicos SA advanced 3 percent to 2.05 reais.

The Ibovespa has retreated 8.4 percent this year, the worst performer after Colombia’s IGBC index among 19 major emerging markets, according to data compiled by Bloomberg. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 0.2 percent over the same period.

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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