The Bovespa index posted its biggest weekly loss since November on concern Brazil’s currency policy will drive away foreign investors.
Pulp company Fibria Celulose SA was the worst performer on the gauge as the real touched a nine-month high, dimming the prospects for exporters of commodities. Souza Cruz SA, Brazil’s biggest tobacco company, tumbled after reporting earnings that trailed estimates.
The Bovespa rose 0.2 percent to 58,497.83 at the close of trading in Sao Paulo, erasing an earlier decline and paring this week’s slump to 3.1 percent. The real slid 0.3 percent to 1.9727 per dollar after the central bank intervened to stem gains. It earlier rallied to its strongest level since May as Finance Minister Guido Mantega signaled Brazil would allow the currency to appreciate another 5 percent.
“Investors don’t like when the government starts changing its policies so often, especially when it comes to something so vital like the currency,” Alexandre Ghirghi, a portfolio manager at Metodo Investimentos in Sao Paulo, said in a phone interview. “This is particularly important for foreign investors, and they account for a big chunk of the trading on the Bovespa.”
Fibria declined 3.4 percent to 23.52 reais. Souza Cruz lost 1.2 percent to 32.06 reais.
The real rose earlier today as Reuters cited Mantega as saying that the government will curb the currency if it reaches 1.85 per dollar. The currency erased gains after the central bank intervened by selling reverse foreign-exchange swaps for the first time since October.
Foreign investors accounted for 40 percent of all stock trading on the Sao Paulo exchange in 2012, according to data from BM&FBovespa SA.
The Bovespa has dropped 7.6 percent from this year’s high on Jan. 3 amid concern that accelerating inflation may curb Brazil’s economic recovery and that the government’s interventionist policies will hurt profits in industries including utilities and energy.
Brazil’s benchmark equity gauge trades at 10.8 times analysts’ earnings estimates for the next four quarters, compared with 9.7 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.