March 1 (Bloomberg) -- The Bovespa index rose to a 10-month high as bets for lower Brazilian borrowing costs lifted consumer stocks and raw material-producers followed commodities higher after a report showed manufacturing expanded in China.
Steelmaker Usinas Siderurgicas de Minas Gerais SA rose the most among raw-material producers as metals prices increased. Homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes led gains by companies that depend on domestic spending.
The Bovespa climbed 1.5 percent to 66,809.80, the highest close since April 26. Fifty-five stocks advanced while 13 fell. The real strengthened 0.2 percent to 1.7142 per U.S. dollar. Industrial metals advanced, with the Bloomberg Base Metals 3-Month Price Commodity Index rising 1 percent, after China’s purchasing managers’ index climbed for a third month in February.
“China’s economic activity should remain strong, at least in the short term, sustaining the demand for Brazilian commodities,” Marc Sauerman, who helps oversee about 650 million reais ($380 million) at JMalucelli Investimentos in Curitiba, Brazil, said by phone. In Brazil, “policy makers have indicated they’ll keep cutting rates aggressively, which should continue to push the Bovespa higher.”
Usiminas, as Usinas Siderurgicas is known, climbed 2.2 percent to 11.91 reais.
In the interest-rate futures market, yields on most contracts fell. The yield on the contract due in January 2013 slid eight basis points, or 0.08 percentage point, to 9.15 percent.
Brazil announced today it will tax foreign loans and bonds by local companies that mature in three years or less in a bid to stem the currency’s appreciation, which could be a sign policy makers may take other measures, including lowering borrowing costs, to curb a rally in the real, said Luciano Rostagno, chief strategist with Banco WestLB do Brasil SA.
“There’s speculation the central bank may use rate cuts to help push the real” lower, Rostagno said by phone from Sao Paulo. The tax increase announced today “reinforces the speculation.”
Cyrela rose 5.1 percent to 18.21 reais. BR Malls gained 2.8 percent to 22.62 reais.
Overseas demand for Brazil’s commodities, combined with interest-rate cuts, will keep pushing investors into Brazilian stocks, said Pedro Bastos, Latin America head for HSBC Holdings Plc’s wealth management division. The Bovespa index will reach 75,000 by year-end, surpassing the record of 73,516 set in 2008, Bastos said in a phone interview from Sao Paulo yesterday.
The Bovespa has advanced 18 percent this year after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The gauge trades at 10.8 times analysts’ earnings estimates, compared with a 10.8 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.
Traders moved 6.59 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 6.97 billion reais this year through Feb. 13, according to data from the exchange.
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