The Bovespa index fell to a 16-week low as utility Centrais Eletricas Brasileiras SA plunged after becoming the latest Brazilian company to report third-quarter earnings that were below analysts’ estimates.
Eletrobras, as the company is known, led declines on the MSCI Brazil/Utilities Index, which fell to the lowest level in three years. Homebuilder PDG Realty SA Empreendimentos e Participacoes dropped the most since July after canceling the release of new projects guidance for 2012.
The Bovespa slid 1.6 percent to 55,402.33 at the close of trading in Sao Paulo, extending its weekly decline to 3.4 percent. The real weakened 0.9 percent to 2.0851 per U.S. dollar. Fifty-eight percent of the 62 Bovespa members that have reported results since September trailed projections, according to data compiled by Bloomberg.
“These disappointing earnings show that President Dilma Rousseff’s plan to boost the economy has not yet produced the expected results, so investors tend to be more cautious about Brazilian companies,” Luis Gustavo Pereira, an analyst at Futura Corretora, said in a phone interview from Sao Paulo. “It’s the main driver for equities.”
Eletrobras, South America’s largest power generator, reported third-quarter net income of 1 billion reais, below the average 1.3 billion-real estimate of two analysts surveyed by Bloomberg. Newspaper Estado de Sao Paulo wrote yesterday that the company would lose 20 billion reais a year if it accepts a government proposal to cut rates as a condition for renewing concessions. The utility didn’t respond to an e-mailed request for comment.
Rousseff’s administration has cut taxes on consumer goods, pressured banks to lower borrowing costs and demanded that electric utilities reduce rates as part of an intervention policy intended to spur a rebound in Latin America’s biggest economy. Annual growth in Brazil slowed to below 1 percent in the first two quarters of the year from 2.7 percent in 2011 and 7.5 percent in 2010.
Eletrobras declined 12 percent to 11.60 reais. PDG retreated 7.3 percent to 2.91 reais.
Tim Participacoes SA slumped 5.1 percent to 7.61 reais as Brazil’s telecommunication regulator, Anatel, ordered the company to suspend its Infinity Day promotion, which consists of unlimited calls at a fixed price for 24 hours between telephones operated by the carrier, because of concern over service quality.
The Bovespa has climbed 5.6 percent from this year’s low on June 5 as central banks around the globe injected cash into their economies and Brazilian policy makers cut benchmark borrowing costs to a record low 7.25 percent.
Trading volume was 6.16 billion reais in stocks in Sao Paulo on Nov. 14, compared with a daily average of 7.2 billion reais this year, according to data compiled by the exchange. Brazilian markets were closed for a holiday yesterday.