The Ibovespa fell as PDG Realty SA Empreendimentos e Participacoes led declines in Brazilian companies that depend on the domestic market amid concern that this year’s rout in the currency will fuel inflation.
The BM&FBovespa Real Estate Index sank the most in two weeks. Cia. Hering fell the most among retailers. Losses were limited as Fibria Celulose SA gained on prospects that a declining real will boost export revenue.
The Ibovespa dropped 0.8 percent to 53,570.46 at the close of trading in Sao Paulo, with 50 of its 73 member stocks lower. The real gained 0.3 percent to 2.2753 per dollar, reversing an earlier drop of as much as 1 percent. It’s still down 6.3 percent in the past three months, the most among 16 major currencies tracked by Bloomberg.
“Despite the strengthening we saw in the past few days, I don’t see the real coming back anywhere near the 2.2 level we had a few months ago, and we’ll have to see how that will affect inflation, which is still running fast,” Joao Pedro Brugger, who helps manage 400 million reais as a portfolio manager at Leme Investimentos, said in a phone interview from Florianopolis, Brazil. “On the other hand, exporters will probably keep benefiting from that.”
The Ibovespa entered a bull market on Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 22 percent in dollar terms this year, compared with a decline of 5.8 percent for the MSCI Emerging Markets Index of developing nations’ equities.
The Getulio Vargas Foundation reported yesterday that Brazil’s IGP-M inflation index of wholesale, construction and consumer prices climbed 1.02 percent in the 10 days beginning Aug. 21, more than the rate forecast by all 13 economists surveyed by Bloomberg. The central bank said in minutes of its policy meeting last month that “currency depreciation represents a source of inflationary pressure in the short term.”
Inflation, as measured by the IPCA index, will probably accelerate to 0.4 percent in September from 0.24 percent in August and to a monthly average of 0.75 percent in the fourth quarter, economists at Banco Itau Unibanco SA wrote in a research note e-mailed to clients today. A weaker real drives up the cost of imports in local-currency terms, adding to inflation.
Brazilian swap rates on contracts due in January 2015 rose four basis points, or 0.04 percentage point, to 10.36 percent. PDG Realty lost 5.5 percent to 2.24 reais. Hering declined 5.1 percent to 32.97 reais.
Fibria added 1.3 percent to 28.63 reais. The company, which is the world’s largest pulp producer, gets about 90 percent of its revenue from outside Brazil.
HRT Participacoes em Petroleo SA sank 6.3 percent to 1.20 reais, extending a three-day slump to 25 percent. The oil and gas company is planning “significant” spending cuts to safeguard its financial stability through 2014, according to a regulatory filing after the close of trading yesterday. It said on Sept. 9 that it had drilled a third dry well in Namibia.