The Bovespa index fell to a four-month low as mining company MMX Mineracao & Metalicos SA led Brazilian commodity exporters lower amid concern that slower growth in Europe will damp demand for raw materials.
All industry groups on the MSCI Brazil Index dropped, with the gauges for financial and energy stocks leading losses. Petrochemicals producer Braskem SA capped its longest losing streak in a month. For-profit college Estacio Participacoes SA fell after Brazil’s Education Ministry rejected its request to open a medical school in the state of Minas Gerais.
The Bovespa declined 0.8 percent to 55,576.67 at the close of trading in Sao Paulo, the lowest since Nov. 16. Forty-nine stocks dropped on the measure while 18 advanced. The real weakened past 2 per dollar for the first time since January. The Standard & Poor’s GSCI index of 24 raw materials slid 0.6 percent after a report showed German manufacturing unexpectedly contracted this month and as Cyprus worked on a new plan to obtain a bailout. S&P cut the nation’s credit rating to CCC from CCC+.
“There’s concern that things in Europe will take a turn for the worse, and the Bovespa is tracking this bad mood,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview. “When you look at valuation, the Bovespa is not really cheap, and with things getting worse abroad, investors get worried.”
Brazil’s benchmark equity gauge trades at 11.3 times analysts’ earnings estimates for the next four quarters, compared with 10.7 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
MMX fell 7 percent to 2.65 reais. Braskem slid 3.5 percent to 13.70 reais. Steelmaker Cia. Siderurgica Nacional SA lost 3.2 percent to 9.12 reais. Estacio declined 0.7 percent to 44.65 reais.
Power utility Cia. Energetica de Minas Gerais advanced 1.4 percent to 22.50 reais. The stock tumbled 14 percent yesterday after Brazil’s electricity regulator, Aneel, cut the preliminary asset valuation used to review the utility’s rates, spurring concern that earnings may be curbed.
Cemig’s earnings guidance, published in May 2012, already incorporates the impact of the rate review, Chief Financial Officer Luiz Fernando Rolla told investors and analysts on a conference call yesterday.
“We said several times there would be a reduction with Aneel’s methodology,” Rolla said. “We don’t think the result of this rate revision should be surprising for the market.”
Meatpacker Minerva SA advanced 1.1 percent to 12.75 reais. While the company reported yesterday an unexpected loss in the three months ending in December, free cash flow was positive for a fifth straight quarter.
The Bovespa has retreated 12 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 6.4 percent over the same period.
Trading volume for stocks in Sao Paulo was 6.53 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.67 billion reais this year through March 18, according to data compiled by the exchange.