Oct. 31 (Bloomberg) -- The Ibovespa dropped for a third straight session as OGX Petroleo e Gas Participacoes SA plunged after filing for bankruptcy protection, setting the oil company up for removal from Brazil’s benchmark equity gauge.
Plane builder Embraer SA dropped after posting a quarterly profit that was below analysts’ estimates. Gafisa SA led homebuilders lower as traders raised bets on higher borrowing costs in Brazil. Steelmaker Gerdau SA rose after its third-quarter earnings exceeded forecasts.
The Ibovespa fell 0.5 percent to 53,900.41 at 3:04 p.m. in Sao Paulo, paring this month’s advance to 3 percent. The real slid 1.6 percent to 2.2267 per dollar today.
“OGX is most to blame for Ibovespa’s recent losses, but the index is not falling just because of that,” Otavio Vieira, who helps manage 350 million reais as a partner at hedge fund Fides Asset Management, said in a phone interview from Rio de Janeiro. “Macroeconomic conditions in Brazil are still weighing on the market. Inflation is high, interest rates are rising and some companies are reporting disappointing earnings.”
Gafisa lost 3.2 percent to 3.04 reais. Swap rates, a gauge of expectations for moves in Brazil’s benchmark interest rates, rose amid speculation that a weaker real will fuel inflation.
OGX tumbled 35 percent to a record 11 centavos. The stock will be removed from the Ibovespa today after the company filed for bankruptcy protection, BM&FBovespa said in a statement. While shares will still trade in Sao Paulo, they will be cut from the benchmark gauge after markets close. The index will be rebalanced after OGX’s removal.
While a 97 percent plunge in its shares this year made OGX the smallest company by market value on the Ibovespa, the stock accounted for 82 percent of the stock benchmark’s 11 percent slump during that period.
The Ibovespa will reflect with more accuracy what happens in the equity market once OGX is removed from it, Luis Gustavo Pereira, a strategist at Futura Corretora brokerage in Sao Paulo, said in a phone interview.
“Now that the Ibovespa won’t move according to OGX’s volatility, things will be more clear,” Pereira said.
Gerdau added 4.3 percent to 17.60 reais. The company posted adjusted net income of 595.1 million reais, which compares with an average estimate of 441.4 million reais, according to data compiled by Bloomberg.
Embraer dropped 4.2 percent to 15.79 reais.
Trading volume of stocks in Sao Paulo was 6.87 billion reais yesterday, compared with a daily average of 7.61 billion reais this year through Oct. 22, according to the latest data available from the exchange.
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