Ibovespa Rises to Three-Month High as Sabesp Leads Utility Gains

The Ibovespa climbed to a three-month high as Cia. de Saneamento Basico do Estado de Sao Paulo led gains in Brazilian utilities amid speculation that regulators will allow the water company to increase rates.

The MSCI Brazil/Utilities Index rose the most since November 2011. State-controlled oil company Petroleo Brasileiro SA rebounded to a one-week high. Metalurgica Gerdau SA, the parent of Latin America’s biggest steelmaker, tumbled as the real’s gain today dimmed the outlook for sales outside Brazil.

The Ibovespa advanced 1.2 percent to 52,351.86 at the close of trading in Sao Paulo, with 53 of its 73 member stocks rising. The real climbed 1.4 percent to 2.3266 per dollar at 5:22 p.m. local time. Sabesp, as Cia. de Saneamento is also known, surged 11 percent to 21.75 reais after O Estado de S.Paulo’s news agency cited an energy official as saying the utility will be allowed to increase rates.

“Sabesp’s news also brings some optimism for utilities in general, as it shows that sometimes regulators can decide in favor of the companies,” Pedro Galdi, the head strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview.

Sabesp will be authorized to increase the rates it charges customers in line with inflation, Sao Paulo state’s energy secretary Jose Anibal said, according to O Estado de S.Paulo. Members of Arsesp, the state utility regulator that approves rate changes, are appointed by the government.

Decision Postponed

Arsesp postponed in July a decision on Sabesp’s rates because it was missing three directors and didn’t have a quorum for meetings, rekindling concern that earnings for companies with government contracts may be hurt by delays in price increases. The federal government said last year that power utilities would have to cut rates to renew licenses, spurring a rout in companies including Centrais Eletricas Brasileiras SA and Cia. de Transmissao de Energia Eletrica Paulista.

Anibal’s press office didn’t respond to a call from Bloomberg News seeking comment. Sabesp’s press office declined to comment.

Petrobras, as Petroleo Brasileiro is also known, added 4.1 percent to 17.54 reais, the most in two weeks. Shares capped their biggest weekly slump in two years last week amid speculation the Brazilian government won’t allow for an increase in fuel prices even as a weaker real makes the company’s gasoline imports more expensive.

The stock “was really tortured” by the gasoline price issue, Luana Helsinger, an analyst at GBM Grupo Bursatil Mexicano in Rio de Janeiro, said by telephone. Today’s gain is “a technical correction,” she said.

Metalurgica Gerdau

Petrobras is selling imported gasoline to distributors at a discount of 23 percent relative to international prices, Bank of America Corp. wrote in a research note to clients Aug 26. Finance Minister Guido Mantega, who is also Petrobras’s chairman, said Aug. 29 there are no plans for an increase in fuel prices.

Metalurgica Gerdau lost 2.9 percent to 21.08 reais.

The Ibovespa has gained 16 percent from this year’s low on July 3 as higher commodity prices and a weaker real fueled a rally in raw-material exporters. Brazil’s benchmark gauge climbed 13 percent in dollar terms during the period, compared with an advance of 3.8 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 7.32 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.73 billion reais this year through Sept. 3, according to data compiled by the exchange.