The Ibovespa stock benchmark fell for a fourth day amid concern that the Brazilian government’s measures to spur growth and tame inflation won’t be enough to rekindle an economic recovery.
Papermaker Klabin SA sank after approving a plan to sell 1.7 billion reais of stock to help finance a new plant. OGX Petroleo & Gas Participacoes SA tumbled the most on the gauge, while Eike Batista’s CCX Carvao da Colombia SA plunged 23 percent, a record drop. B2W Cia. Digital fell, leading a decline in retailers even after President Dilma Rousseff announced today subsidized credit for the purchase of furniture and home appliances.
The Ibovespa dropped 1.2 percent to 49,180.58 at the close of trading in Sao Paulo with 48 of its 71 member stocks falling. The real weakened 1.1 percent to 2.1564 per dollar. The equity gauge entered a bear market yesterday after sinking 21 percent from its January peak on concern accelerating inflation is stunting growth and as global markets decline.
“The government’s actions may have a limited effect, but this administration has lost credibility after so many measures that just didn’t work,” Luis Gustavo Pereira, an analyst at brokerage Futura Corretora, said in a phone interview from Sao Paulo. “The decisions announced today should just not be enough to rekindle the country.”
Rousseff unveiled a plan to free up 18.7 billion reais in subsidized credit that will benefit about 3.4 million families in the government’s low-income housing program, according to official estimates.
Klabin slumped 9.6 percent to 11.25 reais. OGX tumbled 11 percent to 1.04 reais. CCX tumbled 23 percent to 2.45 reais. B2W slumped 6.1 percent to 8 reais.
Rousseff, who took office in 2011, has repeated her predecessor Luiz Inacio Lula da Silva’s recipe of tax cuts, interest-rate reductions and minimum wage increases to try to boost personal consumption. She also forced power utilities to cut the rates they charge customers.
Latin America’s largest economy expanded 0.6 percent in the first three months of 2013, below estimates of a 0.9 percent expansion, as growth in household consumption slowed to 0.1 percent from 1.2 percent in the previous three-month period.
While the expansion slowed, inflation has quickened to 6.5 percent, matching the upper limit of the central bank’s target range.
“As Brazil’s situation deteriorates, investors feel that the government has almost an obligation to act further,” Fernando Goes, an analyst at brokerage Clear Corretora, said by phone from Sao Paulo. “We’re still going to see a lot of volatility.” The Ibovespa rose as much as 1.2 percent earlier today.
Citigroup Inc. analysts Stephen Graham and Nicolas Riva, who had forecast the benchmark gauge would 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.
Brazil’s benchmark equity gauge trades at 11.8 times analysts’ earnings estimates for the next four quarters, compared with a multiple of 10.1 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
Trading volume for stocks in Sao Paulo was 16.1 billion reais today, according to data compiled by Bloomberg. Today was the last day to exercise June Ibovespa options. That compares with a daily average of 7.7 billion reais this year through June 11, according to data compiled by the exchange.