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Bovespa Retreats on European Debt Concern, Goldman Sachs Probe

Brazil’s Bovespa stock index fell, extending a weekly loss, as concern European nations will default on their debt and criminal investigative scrutiny of Goldman Sachs Group Inc. reduced demand for riskier assets.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, and Vale SA, the world’s biggest iron-ore miner, lost more than 2 percent, leading a drop in raw-materials producers. Redecard SA, Brazil’s second-biggest card-payment processor by market value, slumped 2.9 percent after costs climbed more than estimated.

The Bovespa stock index lost 0.7 percent to 67,529.73. Twenty-nine stocks dropped on the index while 34 gained. The Bovespa fell 2.8 percent this week as a federal investigation of possible fraud by Goldman Sachs and a downgrade of Greece’s credit rating to junk spurred speculation credit seizures may stifle the economic recovery.

“You have Goldman worries and some risk aversion before the weekend since some news on Greece may come out,” said Eric Conrads, a hedge fund manager at Mexico City-based Armada Capital SA.

Greek Prime Minister George Papandreou said the nation’s survival was at stake in talks to win a potential $159 billion European Union-led bailout. Moody’s Investors Service said yesterday Greece was vulnerable to a “multi-notch” downgrade if measures don’t go far enough.

Goldman Sachs

Goldman Sachs sank 9.4 percent in U.S. trading to the lowest price since July as two people familiar with the matter said federal prosecutors are investigating transactions to determine whether to bring a criminal fraud case.

Usiminas lost 3.3 percent to 56.11 reais. Vale fell 2.8 percent to 46.53 reais. Vale said it agreed to buy control of mining projects in western Africa for $2.5 billion. Rival MMX Mineracao & Metalicos SA, the ore producer controlled by Brazilian billionaire Eike Batista, fell 3.8 percent to 12.70 reais.

Speculation a share sale by state-controlled oil company Petroleo Brasileiro SA will take place as early as June may have contributed to several Brazilian initial public offerings this year raising less than they originally sought, said Paul Capital Partners in Sao Paulo. Brazil’s IPOs have underperformed offerings in Russia, India and China once the shares began trading.

Share Sales

“It’s going to make life a bit harder for companies looking to go to the market as the liquidity might not be there,” said Nick Robinson, who manages $20 billion in emerging market assets at Aberdeen Asset Management Inc. in Sao Paulo.

At $25 billion, the sale from Rio de Janeiro-based Petrobras would be equal to about 2 percent of the $1.26 trillion market capitalization of all publicly traded shares in Brazil, according to data compiled by Bloomberg. That would be equal to about a $295 billion offering in the U.S. equity market, which has a total value of almost $14.8 trillion.

Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, reported a tripling of first-quarter profit to 36.9 million reais. Renner rose 3.6 percent to 43.01 reais.

Real estate developers rose on a report that Caixa Economica Federal, the federally controlled bank that provides mortgage financing, may transfer the credit approval process to homebuilders to speed up the availability of credit. Under the new system, credit approval may take seven days instead of 30 to 40 days, Valor Economico newspaper reported.

PDG Realty SA Empreendimentos e Participacoes jumped 4.7 percent to 15.96 reais, for the biggest gain on the Bovespa index. MRV Engenharia & Participacoes SA rose 4.7 percent to 12.30 reais.

The Bovespa index trades for 12.8 times analysts’ 2010 earnings estimates, compared with 12.6 times for the MSCI Emerging Markets Index of 22 developing nations’ stocks, and 15.9 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 16.7 times the reported profits of its companies after fetching 25.5 times in November, the most in almost six years, weekly data show.

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