The Ibovespa is set for its best streak of monthly gains in four years after signs of faster growth in China boosted commodity producers and Eike Batista’s OGX Petroleo & Gas Participacoes SA rebounded from a record low.
The stock benchmark has gained 3.5 percent since Sept. 30, poised for a fourth consecutive monthly advance. That would be the longest rally since a six-month stretch in 2009.
OGX, the fifth-heaviest weighted stock on the gauge, jumped 38 percent this month on speculation it would get a capital injection from investors amid talks to restructure debt. The gain is responsible for 17 percent of the Ibovespa’s advance this month, according to data compiled by Bloomberg. Steelmaker Cia. Siderurgica Nacional SA rose the second-most on the index as data showed growth accelerated for the first time in three quarters in China, Brazil’s biggest trading partner.
“The tone in Brazil is much better,” Christopher Palmer, who oversees about $2.5 billion as the London-based director of global emerging markets at Henderson Global Investors Ltd., said in a telephone interview. “We have been getting consistently better economic data from China. And Brazil does offer some value. Brazil is a contrarian story, but there’s some decent fundamentals which are beginning to emerge.”
Stocks worldwide rallied this month after data showed that growth in the world’s second-largest economy accelerated for the first time in three quarters as Chinese Premier Li Keqiang spurred factory output and investment to meet the government’s 2013 expansion goal. The MSCI Emerging Markets Index has climbed 4 percent in October, poised for its second monthly gain, while the MSCI World Index gained 4.2 percent.
The Ibovespa gained 1.7 percent at the close of trading in Sao Paulo today. The MSCI’s gauges of emerging and developed markets rose 0.7 percent and 0.2 percent by 3:20 p.m. in New York.
A report showing lower-than-forecast U.S. job growth also boosted equities as traders speculated that the Federal Reserve will maintain a stimulus program that has helped support emerging-market assets.
Brazilian financial and consumer stocks gained this month as economists raised their 2013 economic expansion forecast to 2.50 percent from 2.48 percent and increased projections for 2014 industrial production expansion to 2.50 percent from 2.39 percent, according to the median of about 100 estimates in a central bank survey published Oct. 21. MSCI’s gauges of the country’s financial and consumer discretionary companies gained at least 5.1 percent.
OGX, which missed a $45 million bond payment Oct. 1, triggering a 30-day grace period, rebounded to 29 centavos from a record low 20 centavos as it negotiates with debt holders to try to avoid filing for bankruptcy. Batista, who has taken six companies public since 2006, is selling assets ranging from oil fields to ports after his net worth slumped by more than $30 billion since early 2012 in a selloff spurred by missed targets and rising debt.
The oil producer had the biggest impact on the direction of the 73-member Ibovespa in 13 of this month’s 19 trading sessions, a trend caused partly by the exchange’s reliance on trading volume for determining the relative importance of individual stocks in the index.
“OGX was a big problem for a long time, and now it helped,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by phone from Rio de Janeiro on Oct. 25. “But I don’t know how much more it will help. The market is still very skeptical on how that will work out.”
The shares slumped 19 percent on Oct. 25, pushing this year’s decline to 93 percent. OGX declined to comment on its share performance or talks with bondholders in an e-mailed response to questions.
The company hired Sao Paulo-based Angra Partners as a “restructuring” consultant, it said on Oct. 15. Angra was already an adviser to EBX Group, Batista’s holding company.
While stocks have advanced this month, the rally could end soon as global demand for raw materials erodes and concern that the Fed will eventually pare the U.S. stimulus program discourages investors from putting money into emerging-market equities, according to Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland.
“The question on everybody’s mind is whether or not there’s enough real strength to continue to propel stocks higher or if it’s more of an oversold bounce,” McCain said by phone on Oct. 24. “So far, we’re not seeing enough resource demand to move some of the economies like Brazil’s, which has always been heavily dependent upon natural resources.”
Commodity producers account for 39 percent of the Ibovespa’s weighting, according to data compiled by Bloomberg.
China’s benchmark money-market rate rose the most since June last week as the central bank refrained from adding funds to markets and corporate tax payments drained cash. The People’s Bank of China may lean toward tightening should there be an acceleration in inflation, Song Guoqing, a central bank academic adviser, said on Oct. 20 in Beijing.
The Ibovespa dropped more than 1 percent in each of the past three sessions, declining 4.1 percent from this month’s peak on Oct. 22. The gauge, which entered a bull market on Sept. 9 after rising 20 percent from this year’s low on July 3 through that day, is still down 17 percent in dollar terms this year, compared with a drop of 2.6 percent for MSCI’s emerging-markets index.
The Ibovespa could extend its rally as companies report their third-quarter earnings, according to Henrique Kleine, the head analyst at Sao Paulo-based brokerage Magliano SA. Nine of the benchmark’s index’s members have posted quarterly results from Oct. 15 through the close of trading on Oct. 25, with five exceeding analysts’ earnings estimates, according to data compiled by Bloomberg.
“I see a positive outlook for equities,” he said in a phone interview from Sao Paulo. “Investors seem more willing to take more risk, and earnings will probably support a rebound.”
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