The Ibovespa fell to the lowest since October 2011 as economists covering Brazil cut their projections for growth and increased estimates for the benchmark interest rate, dimming the outlook for corporate earnings.
JBS SA, the world’s largest beef producer, tumbled the most in six months after agreeing to buy meat-processing plants in Brazil from Marfrig Alimentos SA, which was the best performer on the stock gauge. Exchange operator BM&FBovespa SA fell to the lowest in seven weeks after Standard & Poor’s revised the credit outlook of it and 10 other financial companies to negative last week. MMX Mineracao e Metalicos SA, billionaire Eike Batista’s mining company, gained as a weaker real boosted the prospects for raw-material exporters.
The Ibovespa dropped 0.6 percent to 51,316.65 at the close of trading in Sao Paulo. Forty-six stocks fell on the benchmark while 24 rose.
“Investors and economists are pessimistic about Brazil now, and we don’t see any news or reason for it to be different,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “Companies should suffer from this scenario of low growth and rising interest rates.”
Analysts reduced their projections for economic growth to 2.53 percent in 2013 from 2.77 percent while raising estimates for the year-end benchmark interest rate to 8.75 percent from 8.50 percent, according to a weekly survey posted on the central bank’s website today.
JBS lost 6.5 percent to 6.67 reais, the biggest decline since Dec. 5. Marfrig soared 6.3 percent to 7.92 reais.
BM&FBovespa fell 2.1 percent to 13.31 reais, the lowest price since April 19.
S&P’s revision of financial companies’ credit rating outlooks to negative from stable after the market closed on June 7 followed a reduction of Brazil’s outlook to negative the prior day. The ratings company said that forecasts for a third year of “modest” economic growth and “weaker” fiscal policy could lead to an increase in government debt levels.
The real depreciated 0.7 percent to 2.1471 per dollar, paring a decline of as much as 1.3 percent as the central bank intervened twice today to stem its selloff.
“In this negative scenario, the only companies that can have a good performance are exporters,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil. “Their revenue benefits from a weaker real.” Commodities producers account for about 39 percent of the Ibovespa’s weighting, according to data compiled by Bloomberg.
MMX rose 4.4 percent to 1.67 reais.
The Ibovespa has slumped 19 percent from this year’s peak 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 dropped 13 percent over the same period.
Brazil’s benchmark equity gauge trades at 12.3 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 6.39 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.71 billion reais this year through June 7, according to data compiled by the exchange.