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Ibovespa Erases Decline for 2014 as Eletrobras, Petrobras Rally

The Ibovespa gained, erasing its loss for 2014, as state-run companies including Petroleo Brasileiro SA rallied, outweighing concern that higher borrowing costs will sap demand for Brazilian equities.

State-controlled utility Centrais Eletricas Brasileiras SA extended a three-day rally to 12 percent. Phone company Oi SA rebounded from the lowest in 19 years after Brazil’s securities regulator lifted a suspension of its share offering that’s part of a plan to merge with Portugal Telecom SGPS SA. Steelmaker Usinas Siderurgicas de Minas Gerais SA followed metals higher.

The Ibovespa rose 2.8 percent to 51,701.05 at the close of trading in Sao Paulo, the highest level since November 29. With today’s gain, the gauge is up 0.4 percent this year. The real weakened 0.3 percent to 2.2696 per dollar at 5:29 p.m. local time. State-run companies have gained recently on speculation that President Dilma Rousseff’s re-election in October may be at risk as polls show a decline in her approval rating, said Pedro Galdi, the chief analyst at brokerage firm SLW Corretora.

“The way state-run companies have been managed under Dilma’s administration drove shares down, and we’ve seen a rebound since speculation started to mount about her chances,” Galdi said in a phone interview from Sao Paulo.

Approval of Rousseff’s way of governing fell to 51 percent in March from 56 percent in December, an Ibope poll published by the National Industry Confederation showed last week. The Ibovespa has gained 15 percent since this year’s low on March 14 as the voting stock of Eletrobras leading the advance with a 44 percent surge. The shares gained 4.4 percent to 7.05 reais today after earlier surging 9.5 percent.

Usiminas, Petrobras

The country’s political outlook and global factors are helping boost returns of Brazilian assets, Arminio Fraga, a founding partner of Gavea Investimentos and former central bank president, said in an interview in Rio de Janeiro.

“Political winds may be changing,” said Fraga, who is advising likely opposition candidate Aecio Neves. “Whether that means the opposition wins or the current administration becomes more open to changing as well, I think there’s a feeling here that what’s going on may not last.”

Usiminas, as Usinas Siderurgicas is known, gained 3 percent to 10.24 reais today. Petrobras, as Petroleo Brasileiro is known, added 4.7 percent to 16.56 reais. Oi jumped 6.9 percent to 3.08 reais.

Selic Rate

The Ibovespa earlier today fell 0.1 percent as bets for higher borrowing costs in Brazil pushed homebuilders lower. The central bank is expected to raise the benchmark interest rate by 0.25 percentage point to 11 percent at the end of its two-day policy meeting today, according to all 57 estimates surveyed by Bloomberg. It would be the second consecutive 25 basis point increase after six straight 50 basis point increases.

Brazil’s benchmark stock index entered a bear market on March 14 after falling 20 percent from its October 2013 high through that day. Trading volume of stocks in Sao Paulo was 9.45 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 6.46 billion reais this year, according to data from the exchange.

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