Most Brazilian stocks fell as Gafisa SA led homebuilders lower on speculation policy makers may speed up the pace of interest-rate increases to curb inflation, dimming the outlook for companies that sell on credit.
Rossi Residencial SA, the country’s worst-performing homebuilder in the past 12 months, retreated from a two-month high as swap rates, a gauge of expectations for borrowing costs, rose. The MSCI Brazil/Consumer Discretionary Index dropped the most among 10 industry groups. Exporters including pulp maker Fibria Celulose SA gained as a weaker real boosted the outlook for sales outside Brazil.
The Ibovespa was little changed at 51,574.09 at the close of trading in Sao Paulo. Forty-five stocks sank on the measure while 26 climbed. The real fell 0.8 percent to 2.4116 per dollar at 5:23 p.m. local time, the lowest since March 2009, even after the central bank intervened in the currency market to prop it up.
“Interest rates are rising, which ends up hurting the Ibovespa,” Otavio Vieira, a partner at hedge fund Fides Asset Management in Rio de Janeiro, said in a telephone interview. “Inflation is rising, growth is weak and the currency is falling. The central bank will have a hard time balancing everything.”
Rossi sank 4.1 percent to 3.05 reais, while Gafisa dropped 6.2 percent to 3.04 reais. Retailer Cia. Hering fell 6.5 percent to 31.10 reais, the worst performance on MSCI’s Brazil consumer discretionary index. Fibria gained 6.8 percent to 28.84 reais.
The real’s plunge is spurring concern that a weaker currency will fuel inflation. Brazil’s currency has dropped 16 percent against the dollar in the past three months, the worst performance among emerging markets, amid speculation that the U.S. will curb monetary stimulus.
Brazilian swap rates on the contracts due in January 2015 climbed 28 basis points, or 0.28 percentage point, to 10.61 percent.
A weaker real “suggests operational earnings gains in the future” for companies such as Fibria, Citigroup Inc.’s strategists Stephen H. Graham and Fernando Siqueira wrote in a note to clients today. Steelmakers such as Usinas Siderurgicas de Minas Gerais SA also benefit as the currency’s slump make steel imports more expensive in Brazil, according to Citigroup’s analysts.
Usiminas, as Usinas de Minas Gerais is also known, jumped 6.2 percent to 10.96 reais. The producer is increasing the steel prices it charges customers by as much as 7.6 percent, according to a person with knowledge of the decision. Usiminas’s press office in Belo Horizonte, Brazil, said the company doesn’t comment on its pricing policy.
The Ibovespa has gained 14 percent from this year’s low on July 3 as higher commodities prices boosted raw-material exporters. Brazil’s benchmark equity gauge trades at 13.5 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
Trading volume of stocks in Sao Paulo was 9.12 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.58 billion reais this year through Aug. 6, according to data compiled by the exchange.