The Ibovespa rose for the first time in three sessions as Cia. Energetica de Sao Paulo led power utilities higher amid speculation that recent losses pushing valuations to the lowest since June were excessive.
BM&FBovespa’s Electric Energy Index of 15 utilities rose from the lowest in four years. Machinery manufacturer Industrias Romi SA (ROMI3) jumped the most since 2007 after Banco Itau BBA SA raised it to the equivalent of buy. Eneva SA (ENEV3) sank for an eighth day after a person with knowledge of the matter said the energy company will probably postpone the start of a power plant.
The Ibovespa rose 1.2 percent to 47,150.83 at the close of trading in Sao Paulo, the most in a week. The real gained 0.1 percent to 2.3933 per U.S. dollar at 5:22 p.m local time. The Electric Energy Index traded yesterday at 9.64 times its earnings forecast for the next 12 months after falling for four straight sessions amid speculation that the government will ration electricity as a drought in some parts of Brazil saps reservoirs feeding hydropower-generating dams.
“Rationing is still a possibility, but after the losses in the past few days, there may be room for a correction,” Alvaro Bandeira, a partner at Orama Asset Management, said in a telephone interview from Rio de Janeiro. “It’s not good for utilities if there’s rationing, but there are ways of softening the blow. They could increase rates or get some financial assistance from the government.”
Dam levels in the Southeast and Midwest regions of Brazil fell to 35.3 percent yesterday from 35.4 percent a day earlier, according to a report from the country’s power-grid operator known as ONS.
Cesp, as Cia. Energetica is known, climbed 6.3 percent to 22.35 reais. CPFL Energia SA (CPFE3) rose 5.4 percent to 16.25 reais.
Eneva plunged 5.6 percent to 1.85 reais. While the Parnaiba 2 power plant had been scheduled to begin operations by the end of March, the company’s is no longer sure it will go online, according to a person who asked not to be identified because the delay hasn’t been publicly disclosed.
Gafisa SA surged 5.4 percent to 3.11 reais, leading a rebound in homebuilders after the BM&FBovespa Real Estate Index yesterday plunged the most since July.
Fifty-five of the Ibovespa (IBOV)’s member stocks rose today while 18 fell. The equity gauge earlier sank 1 percent on speculation that the central bank will have to raise interest rates further to contain inflation. Swap rates, a gauge of expectations for interest-rate moves, rose on most contracts as concern mounted that budget cuts Brazil is planning won’t be enough to help control inflation.
Romi jumped 14 percent to 4.80 reais.
Prumo Logistica SA rose 2.2 percent to 92 centavos. Newspaper O Estado de S. Paulo reported without saying where it got the information that the company would get a 1.8 billion real loan from Brazil’s national development bank.
Standard & Poor’s placed Brazil’s rating last year on negative outlook, and Moody’s Investors Service lowered its outlook to stable from positive, citing deteriorating fiscal policy.
Finance Minister Guido Mantega told reporters in Brasilia today that the government will announce spending cuts tomorrow. While Congress passed the budget in December, the federal government is allowed to cut expenditures at any time during the fiscal year.
The Ibovespa has tumbled 16 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 6.97 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.48 billion reais this year, according to data from the exchange.