Bovespa Extends Best Yearly Gain Since ‘09 on Stimulus for Banks

The Bovespa index rose, extending its biggest yearly rally since 2009, after policy makers cut reserve requirements for Brazilian lenders to spur investment in Latin America’s largest economy.

Banco do Brasil SA, Latin America’s biggest lender by assets, jumped to the highest level in three months. B2W Cia. Global do Varejo, the country’s largest online retailer, advanced the most in two weeks. JBS SA dropped after Russia said traces of salmonella bacteria were found in meat that the company shipped.

The Bovespa advanced 0.9 percent to 60,952.08 at the close of trading in Sao Paulo, extending this year’s jump to 7.4 percent. In dollar terms, the gauge fell 2 percent in 2012 as the real posted a second year of losses. Fifty-six stocks climbed on the benchmark today while 12 fell. Brazilian markets will be closed Dec. 31.

“With this change in banks’ reserve requirements, the government is showing that it’s seeking to boost credit so the recovery can speed up,” Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA, said by phone from Sao Paulo.

Large banks that provide credit for investment in capital goods, such as machines and equipment, can deduct as much as 20 percent of reserve requirements for their cash deposits, the central bank said in a statement yesterday. This change applies to banks with a minimum of 6 billion reais in total equity, and the monetary authority said it expects the measure will create 15 billion reais in fresh credit.

Banco do Brasil jumped 2.2 percent to 25.60 reais. Banco Santander Brasil SA gained 2.2 percent to 14.97 reais.

B2W Gains

B2W rose 3.7 percent to 17 reais, extending this year’s rally to 89 percent, the biggest on the Bovespa after consumer products maker Hypermarcas SA’s 96 percent gain.

JBS lost 0.7 percent to 6 reais. The company said in a statement today it hasn’t been notified by Russia about the salmonella case and that it follows sanitary procedures set by Brazilian authorities.

The real rose 0.2 percent to 2.0475 per dollar. The Brazilian currency has weakened 8.8 percent this year, the worst performance after Argentina’s peso among 25 major emerging-markets.

The Bovespa has climbed 16 percent from this year’s low in June as stimulus from central banks around the world eased concerns about an economic slowdown, while record low benchmark lending rates have pushed some investors to move into stocks from fixed income.

Brazil’s benchmark equity gauge trades at 11.4 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.1 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 5.95 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.27 billion reais this year through Dec. 26, according to data compiled by the exchange.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE