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Citigroup Pushes Back Brazil Stock Rebound Call After Selloff

Citigroup Pushes Back Brazil Stock Rebound Call After Selloff
A Citigroup Inc. Citibank sign stands outside their office building in the financial district of Sao Paulo, Brazil. Photographer: Dado Galdieri/Bloomberg

Citigroup Inc. tempered its projections for a recovery in Brazilian stocks after the Ibovespa plunged into a bear market, predicting that the benchmark won’t rebound until next year.

The 71-stock index has plunged more than 22 percent in 2013 from its peak of 63,312.46 on Jan. 3. Citigroup analysts Stephen Graham and Nicolas Riva, who had forecast a return to a level of 63,000 by the end of this year, now project that the measure will rebound by mid-2014, according to a research note dated yesterday. The bank had already cut its year-end Ibovespa target twice this year, according to the note.

“The second half is only three weeks away, and things have just gotten uglier,” the analysts wrote. “Growth expectations around 4 percent are a distant memory.”

The Ibovespa fell 0.9 percent to 49,304.44 at 3:13 p.m. in Sao Paulo today. Brazil’s benchmark equity gauge has plunged as faltering growth drove down consumer stocks and raw-material exporters slid with commodities on concern about global monetary stimulus. The MSCI Emerging Markets Index fell 12 percent during the same period while the MSCI Global Index gained 7.1 percent.

Latin America’s largest economy expanded 0.6 percent in the first three months of 2013, below the 0.9 percent median forecast in a Bloomberg survey. Economists expect Brazil’s gross domestic product to expand 2.5 percent this year, down from 3.2 percent in January, according to a central bank weekly survey published on June 10.

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