Ibovespa Rises as Slower Brazil Inflation Bolsters BR Properties

The Ibovespa climbed to a three-week high as developer BR Properties SA (BRPR3) led real estate stocks higher after a report showed slower-than-forecast inflation in Brazil.

BB Seguridade Participacoes SA (BBSE3), the insurance company controlled by Banco do Brasil SA, rallied after reporting fourth-quarter earnings that exceeded analysts’ estimates. Cia. Siderurgica Nacional SA, the steelmaker known as CSN, followed commodities higher. The BM&FBovespa Real Estate Index jumped the most since Jan. 3.

The Ibovespa rose 1.6 percent to 48,462.79 at the close of trading in Sao Paulo, with 62 stocks higher and 11 lower. The real climbed 0.4 percent to 2.4013 per U.S. dollar at 5:22 p.m. local time. Brazil’s wholesale, construction and consumer prices climbed 0.22 percent in the 10 days starting Jan. 21, the Getulio Vargas Foundation said today. The median forecast of economists surveyed by Bloomberg was 0.35 percent.

“Investors were bracing themselves for a worsening in the outlook for the economy, but maybe there’s been some exaggeration,” Joao Pedro Brugger, who helps oversee 400 million reais at Leme Investimentos Ltda., said in a phone interview from Florianopolis, Brazil. “Some stocks are looking attractive now.”

BR Properties SA rose 7.3 percent to 17.77 reais. Homebuilder Brookfield Incorporacoes SA (BISA3) gained 6 percent to 1.24 reais, while Cyrela Brazil Realty SA Empreendimentos e Participacoes added 1.9 percent to 14.26 reais. The BM&FBovespa Real Estate Index climbed 2.4 percent.

BB Seguridade

BB Seguridade gained 4.3 percent to 24.50 reais, the biggest one-day rally since its April initial public offering. The company posted adjusted net income of 707.4 million reais in the fourth quarter, which compared with an average estimate of 631.8 million reais among analysts surveyed by Bloomberg.

CSN advanced 3.2 percent to 11.60 reais.

Gains in the Ibovespa could prove to be short-lived as concern mounts that a drought will curb electricity supply in Brazil amid declining water levels in reservoirs feeding hydropower dams, said Rogerio Freitas, a partner at hedge fund Teorica Investimentos.

“There’s now significant chances for a power rationing,” Freitas said by phone from Rio de Janeiro. “A cut in energy supply means companies will have to cut back their output, hurting the economy. Also food prices will probably rise, fueling inflation. How can equities perform any better with everything that’s going on?”

Food Prices

Brazilian soybean and corn growers will reap less than previously forecast as heat and drought harm crops in several parts of the country, a report from the government agency known as Conab showed today. The worst drought and heat in decades is threatening farm output, pastures, hydroelectric dam reservoirs and home water supplies. The dryness will continue in the southeast and center-west this month, Conab said.

The MSCI Brazil/Consumer Discretionary Index was the worst performer among 10 industry groups as three of four retailers on the measure tumbled. Lojas Renner SA (LREN3) dropped 1.3 percent to 54.05 reais.

The Ibovespa earlier today fell as much as 0.3 percent. The index’s 30-day volatility, a measure of price swings, rose to 21.5 today, the highest level since Oct. 10, according to data compiled by Bloomberg.

Brazil’s benchmark equity gauge has tumbled 14 percent from a bull-market high on Oct. 22 as inflation exceeded policy makers’ target and concern mounted that higher government spending will lead to a reduction in the country’s credit rating.

Trading volume of stocks in Sao Paulo today was 6.6 billion reais, data compiled by Bloomberg show. That compares with a daily average of 6.35 billion reais this year, according to data 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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