Ibovespa Drops Most in World as Petrobras Plunges on Price View

The Ibovespa sank the most among the world’s biggest stock gauges as Petroleo Brasileiro SA (PETR4) signaled it will keep subsidizing fuel prices, stoking concern that Brazil’s economic policies are hurting corporate profits.

The state-controlled oil company slumped the most since November 2008, contributing most to the index’s decline. MMX Mineracao & Metalicos SA, the iron-ore producer founded by former billionaire Eike Batista, fell after its third-quarter loss was wider than analysts forecast. Voting shares of phone company Oi SA (OIBR3) sank from a two-week high as exchange operator BM&FBovespa SA said the stock will be removed from the benchmark after a rebalancing.

The Ibovespa lost 2.4 percent to 51,244.87 at the close of trading in Sao Paulo, the steepest drop among the 20 biggest gauges tracked by Bloomberg. While announcing an increase of 4 percent in gasoline prices, Petrobras, as Petroleo Brasileiro is known, didn’t disclose a plan for phasing out fuel subsidies that have cut earnings and increased debt.

“This is the type of thing that suggests the government worries more about its own agenda than about the impact its policies have on companies such as Petrobras,” Joao Pedro Brugger, a portfolio manager at Leme Investimentos, said in a phone interview from Florianopolis, Brazil. “It looks like the goal is to control inflation and boost growth, but it ends up driving investors away, which ends up hurting the economy.”

Brazil’s inflation has remained about the 4.5 percent midpoint of the government’s target since 2010.

Government Intervention

Petrobras, whose chairman is Finance Minister Guido Mantega, sells imported fuel in Brazil below cost. Chief Executive Officer Maria das Gracas Foster said in an Oct. 25 statement that the gap between domestic and international prices were affecting the company’s cash flow and leverage. Shares slumped 9.2 percent to 17.36 reais.

President Dilma Rousseff has used other interventionist policies including forcing power utilities and phone companies to reduce rates, capping car imports from Mexico and cutting taxes on consumer goods to try to spur a rebound in Latin America’s biggest economy. Analysts surveyed weekly by the central bank forecast that gross domestic product will expand by 2.5 percent in 2013, down from an estimate of 3.26 percent at the start of the year.

The real weakened 0.8 percent to 2.3544 per U.S. dollar at 5:23 p.m. local time.

MMX slipped 3 percent to 65 centavos. The company posted a net loss of 1.21 billion reais in the three months ending in September, which compares with the average estimate for a loss of 31.1 million reais among analysts surveyed by Bloomberg.

Index Changes

Oi fell 4.1 percent to 3.71 reais. BM&FBovespa said Oi’s voting shares, along with the voting stocks of retailer B2W Cia. Global do Varejo, farm company Vanguarda Agro SA (VAGR3) and steelmaker Usinas Siderurgicas de Minas Gerais SA and preferred shares of utility Cia. de Transmissao de Energia Eletrica Paulista, will be removed from the Ibovespa starting Jan. 6, according to a preview released today based on trading volumes and market value data compiled on Nov. 29.

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 27 percent in dollar terms this year, compared with a decline of 4 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 7.57 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.52 billion reais this year through Nov. 29, according to data available from 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: Brendan Walsh at bwalsh8@bloomberg.net

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