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Ibovespa Snaps Two-Day Drop as Brazil Growth Outlook Boosts PDG

The Ibovespa (IBOV) snapped a two-day drop as real estate companies including PDG Realty SA Empreendimentos & Participacoes rose after an increase in industrial production eased concern that Brazil’s recovery is faltering.

Card-payment processor Cielo SA (CIEL3) advanced to a two-month high after Banco BTG Pactual SA raised it to buy. Mining company Vale SA (VALE5) rebounded from a six-week low, while ALL - America Latina Logistica SA gained the most on the benchmark gauge. BRF SA, Brazil’s biggest foodmaker, sank the most since October.

The Ibovespa gained 0.3 percent to 50,576.64 at the close of trading in Sao Paulo, with 38 stocks higher and 33 lower. The benchmark stock gauge sank 15 percent in 2013. The real weakened 0.8 percent today to 2.3925 per U.S. dollar at 5:21 p.m. local time.

“Part of the Ibovespa’s bad performance in 2013 reflected pessimism about the Brazilian economy, and on a day like today we see some correction,” Alvaro Bandeira, a partner at Orama Asset Management, said in a telephone interview. “I don’t think it’s enough to sustain a big rebound for the Ibovespa, but helps in the short run.”

Brazil’s industrial output expanded 0.4 percent in November from a year earlier, the national statistics agency reported today. The median forecast of economists tracked by Bloomberg was for a 0.8 percent decline. Production fell 0.2 percent from the previous month, a drop smaller than every estimate among the analysts surveyed.

Homebuilder PDG jumped 2.2 percent to 1.90 reais. Developer BR Properties SA (BRPR3) advanced 2.6 percent to 18.04 reais. Shopping center owner BR Malls (BRML3) SA climbed 2.2 percent to 17.42 reais.

Rating Outlook

BRF sank 3.4 percent to 45.90 reais.

The Ibovespa probably won’t rebound this year as concern that Brazil’s credit rating may be reduced discourages investors from buying stocks, according to Fernando Goes, an analyst at Clear Corretora.

Standard & Poor’s and Moody’s Investors Service lowered their outlooks last year on Brazil’s credit grade, which both have at two levels above junk, as the government budget deficit widened to the highest since 2009 in November.

“The possibility of a downgrade in Brazil’s rating has been putting investors off the equity market,” Goes said in a phone interview from Sao Paulo.

Cielo, Vale

Cielo increased 0.1 percent to 67.90 reais. BTG Pactual analysts including Eduardo Rosman wrote in a research note to clients that shares will rise to 78 reais by year-end.

“It’s hard not to be bullish on Cielo,” the analysts wrote, citing low competition in the industry and better-than-forecast earnings in past quarters.

Vale added 0.6 percent to 31.08 reais. ALL gained 3 percent to 6.25 reais.

The Ibovespa was the worst performer last year among the 20 biggest equity indexes tracked by Bloomberg. Brazilian stocks sank as policy makers boosted borrowing costs to curb inflation that exceeded the government’s target for a third consecutive year. The central bank will lift the Selic rate for a seventh straight time next week, according to economists surveyed by Bloomberg.

Trading volume of stocks in Sao Paulo was 5.9 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 7.42 billion reais in 2013, 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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