The Bovespa index rose to a two-week high as homebuilder MRV Engenharia & Participacoes SA led gains by companies that sell locally amid speculation that policy makers will keep borrowing costs at record lows.
Companies controlled by billionaire Eike Batista, including port developer LLX Logistica SA and iron-ore producer MMX Mineracao & Metalicos SA were among the best performers on the benchmark. Real estate brokerages LPS Brasil Consultoria de Imoveis SA and Brasil Brokers Participacoes gained after Citigroup Inc. rated both stocks a buy in new coverage. Nine of 10 industry groups on the MSCI Brazil index advanced.
The Bovespa climbed 0.5 percent to 56,186.56 at the close of trading in Sao Paulo, the highest since March 28. Forty-seven stocks gained on the gauge while 22 dropped. The real rose 0.4 percent to 1.9728 per dollar. Brazilian swap rates on contracts due in January 2017 fell 0.03 percentage point to 9.11 percent after data released by the national statistics agency showed inflation slowed more than forecast last month.
“Inflation figures came in lower than expected, which is good for equities, as it may give some room for the central bank to postpone interest-rate increases,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a telephone interview.
Consumer prices in Brazil as measured by the IPCA index rose 0.47 percent in March after climbing 0.60 percent in the prior month, the national statistics agency reported today. The median estimate of economists surveyed by Bloomberg was for a 0.50 percent increase. Annual inflation accelerated to 6.59 percent, exceeding the 6.50 percent upper limit of the central bank’s target range for the first time since November 2011.
Minutes of the central bank’s March 5-6 meeting indicated that an increase in the benchmark lending rate from a record low 7.25 percent wasn’t imminent as policy makers said “a cautious management of monetary policy” was needed. Board members are next scheduled to set rates on April 16-17.
Brasil Brokers gained 1.9 percent to 6.83 reais, and LPS advanced 2.6 percent to 17.54 reais.
“These companies offer exposure to the Brazilian emerging middle class at a lower valuation than most,” Citigroup analysts Paola Mello and Dan McGoey wrote in a research note dated yesterday. “They serve the entire homebuilding industry, including the non-listed builders, which are in better shape than many of the well-known listed ones.”
Brasil Brokers trades at 13.4 times its forecast 2013 earnings, while LPS trades at a ratio of 14.8, below the average in the last three years of approximately 17.5 times, according to Citigroup’s analysts.
LLX gained 9.7 percent to 2.26 reais. MMX advanced 2.5 percent to 2.06 reais. MRV jumped 7.6 percent to 9.78 reais.
The Bovespa has retreated 11 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 6.7 percent over the same period.
Brazil’s benchmark equity gauge trades at 11.4 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 9.27 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.43 billion reais this year through April 8, according to data compiled by the exchange.