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Ibovespa Declines Second Day as Moody’s Lowers Brazil’s Outlook

The Ibovespa sank for a second day as PDG Realty SA Empreendimentos & Participacoes (PDGR3) led declines in homebuilders after Moody’s Investors Service cut Brazil’s rating outlook, citing “an extended low-growth period.”

Cia. Energetica de Sao Paulo, the power utility known as Cesp, dropped to a four-week low after Credit Suisse Group AG cut its recommendation to the equivalent of hold. The BM&FBovespa Real Estate Index snapped a two-day advance.

The Ibovespa retreated 1.1 percent to 52,489.86 at the close of trading in Sao Paulo with 57 stocks lower and 15 higher. Trading volume for the index’s members was 24 percent lower than the average in the prior five days. The real weakened 0.6 percent to 2.2057 per dollar at 5:17 p.m. local time after Moody’s cut its outlook on Brazil’s credit rating to stable from positive.

“It’s hard to disagree with Moody’s because Brazil is indeed going through a period of weak growth,” Luis Gustavo Pereira, a strategist at Futura Corretora brokerage, said in a phone interview from Sao Paulo. “It’s a big name confirming the view that growth is disappointing.”

Moody’s said in a statement it forecasts Brazil’s gross domestic product will grow at annual rates of “just over” 2 percent in 2013 and 2014. Industrial production unexpectedly stalled in August as factories reduced output of consumer goods, the national statistics agency reported yesterday.

Cesp Decline

PDG dropped 4.1 percent to 2.36 reais. The BM&FBovespa Real Estate Index slid 1.9 percent to a three-week low. Cesp dropped 3 percent to 22.60 reais.

Oi SA slumped 13 percent to 3.85 reais as Standard & Poor’s put its credit rating on review for a possible cut. The stock advanced 5.2 percent yesterday after it agreed to merge with Portugal Telecom SGPS SA.

“Based on our preliminary assessment, it should take longer for the combined entity to show the stronger credit protection measures that were supporting the stable outlook on Oi,” S&P said in a statement yesterday.

The Ibovespa entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 20 percent in dollar terms this year, compared with a decline of 4.7 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

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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