The Bovespa index dropped to a three-week low as Cia. de Transmissao de Energia Eletrica Paulista led losses among utilities amid rekindled concern the government’s pledge to cut electricity rates will hurt profits.
Centrais Eletricas Brasileiras SA plunged to its lowest since 2005 as the MSCI Brazil/Utilities index dropped the most among 10 industry groups. Mining company MMX Mineracao & Metalicos SA declined after the stock was cut to the equivalent of sell at Morgan Stanley. Card-payment processor Cielo SA rallied after it was rated buy at Credit Agricole Securities.
The Bovespa fell 0.3 percent to 58,458 at the close of trading in Sao Paulo, the lowest since Sept. 10. Thirty-three stocks dropped on the gauge while 34 advanced and one was unchanged. The real climbed 0.2 percent to 2.0184 per U.S. dollar.
“Recent government interventions in sectors like utilities could have increased the risk perception of Brazilian stocks among foreign investors in the short term,” Joao Pedro Brugger, a portfolio manager at Leme Investimentos, said by telephone from Florianopolis, Brazil.
President Dilma Rousseff is forcing utilities in Brazil to cut rates by as much as 28 percent in a bid to stoke economic growth and make companies more competitive. The reductions will be a requirement for utilities renewing operating licenses through 2017.
Transmissao de Energia Eletrica Paulista, a Sao Paulo-based electricity distributor also known as Cteep, sank 3.6 percent to 33.85 reais. Eletrobras fell 3.3 percent to 16.95 reais.
Homebuilder Gafisa led the declines in the Bovespa index, dropping 7.6 percent, to 3.79 reais. Labor Minister Carlos Brizola Neto announced increased subsidies and a higher price ceiling in the federal housing program Minha Casa Minha Vida.
MMX fell 4.7 percent to 4.48 reais, the lowest since April 2009. Cielo climbed 5.1 percent to 52.86 reais.
Brazil’s benchmark equity index earlier gained as much as 0.6 percent after European Central Bank President Mario Draghi said the ECB is ready to undertake bond buying “once all the prerequisites are in place.”
The Bovespa has climbed 11 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concerns and borrowing costs at a record low in Brazil boosted demand for equities. The index trades at 13.3 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.3 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 6.51 billion reais ($3.22 billion) in stocks in Sao Paulo today, which compares with a daily average of 7.31 billion reais this year through Oct. 2, according to data compiled by the exchange.