Bovespa Rebounds as Valuations Approach Five-Month Low

Most Brazilian stocks fell as signs of a slowdown in China dimmed the outlook for exports to the South American country’s top trading partner, outweighing valuations that approached the cheapest level in five months.

Homebuilders Gafisa SA and Rossi Residencial SA were the worst performers on the benchmark Bovespa index. PDG Realty SA Empreendimentos e Participacoes gained after saying it approved a capital injection of 800 million reais ($389 million) from a shareholder. Mining company Vale SA, whose main export market is China, fell as metal prices slid. Trading in Banco Cruzeiro do Sul SA was suspended after the central bank took over its management, citing “serious violations” of regulations.

The Bovespa was little changed at 53,416.75 at the close in Sao Paulo. Forty-one stocks dropped while 25 rose. The gauge trades at 9.1 times analysts’ earnings estimates for the next four quarters, near the lowest since January. The real weakened 0.9 percent at 2.0585 per U.S. dollar.

“Some stocks may be cheap considering the companies are in good situation individually, but the negative macro scenario is finally overshadowing the micro perspectives,” Rogerio Freitas, a partner at Teorica Investimentos, said by phone from Rio de Janeiro. “We see bad economic indicators everywhere, not only in some countries, so it seems the slowdown is really global.”

China’s non-manufacturing purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. In the U.S., order to factories unexpectedly declined for a second month in April, pointing to a deceleration in manufacturing as the global economy cools, a Commerce Department report showed today.

Gafisa Tumbles

Gafisa fell 5.4 percent to 2.27 reais after Valor Economico reported that the company is having trouble raising the cash to complete the acquisition of its high-income Alphaville unit, without saying where it got the information. The homebuilder’s press office declined to comment when contacted by Bloomberg News.

Rossi lost 5.2 percent to 4.88 reais. Vale slid 0.2 percent to 36.92 reais. PDG Realty advanced 1.8 percent to 3.33 reais, the steepest advance in a week.

Cruzeiro do Sul, Brazil’s 27th-largest lender by assets, “violated financial-system rules” and regulators found “unsubstantiated asset items,” the central bank said in a statement. Trading of the lender’s shares was suspended after the stock plunged 40 percent last week.

Cruzeiro do Sul Takeover

Brazil’s deposit insurance fund, known as FGC, will manage the Sao Paulo-based bank for 180 days, the central bank said. Cruzeiro do Sul said in a regulatory filing it will only comment on its potential losses after investigations.

Some other mid-size banks fell. Banco Industrial e Comercial SA, the Sao Paulo-based lender known as BicBanco, tumbled 6.3 percent to 6.23 reais. Banco do Estado do Rio Grande do Sul SA dropped 2.6 percent to 15.48 reais.

“After something like this happens, the natural immediate reaction is to be more cautious about smaller banks,” Aloisio Lemos, an analyst at Agora Corretora brokerage, said by phone. “But it’s not something that should last very long. Cruzeiro do Sul is a fairly small bank. It looks like an isolated problem.”

Some consumer stocks dropped after a central bank survey showed economists covering Brazil lowered their 2012 growth forecast to 2.72 percent to 2.99 percent. Cia. de Bebidas das Americas, Latin America’s largest brewer, lost 1.4 percent to 72.40 reais. Retailer Companhia Brasileira de Distribuicao Grupo Pao de Acucar fell 1.2 percent to 75.60 reais.

The Bovespa entered a bear market on May 17 after tumbling 21 percent from this year’s high on March 13 through that day. Trading volume was 5 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg shows. That compares with a daily average of 7.24 billion reais this year through June 1, according to data from the exchange.

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