Brazil Equity Inflows Sink to Lowest in 2015 as Stocks Decline

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Foreign investors are putting money into Brazilian stocks at the slowest pace this year as Latin America’s largest economy heads toward a recession. The Ibovespa extended a three-day slump.

After putting a net 7.6 billion reais ($2.44 billion) into the nation’s shares in April, the most for any month since at least 2010, international buyers added just 1.5 billion reais in May, the Sao Paulo exchange said on its website.

Brazil’s stocks have slid 9 percent from this year’s high as disappointing economic figures outweighed the government’s efforts to shore up the budget as it seeks to avoid a cut to its investment-grade credit rating. A central bank survey released Monday showed analysts forecast gross domestic product will shrink 1.3 percent this year, the most since 1990.

“We continue to see poor data,” Fernando Goes, an analyst at brokerage firm Clear Corretora, said by telephone from Sao Paulo. “The government is having a hard time getting the fiscal adjustment through, and is increasing taxes to make up for it, which is bad for stocks.”

The Ibovespa dropped 0.3 percent to 52,809.64 at the close of trading in Sao Paulo, after rising as much as 0.7 percent earlier. The real added 1.1 percent as of 5:22 p.m. local time after President Dilma Rousseff told newspaper O Estado de S. Paulo that fiscal reforms need to be strong enough to allow Brazil to restore growth. The government will announce measures to further boost the economy by August, she said.

Bull Market

Foreign investments helped send the Ibovespa into a bull market in April, when the index gained more than 20 percent from this year’s low. Stocks rallied even as data showed industrial confidence dropped to a record and unemployment rose to the highest in three years. Finance Minister Joaquim Levy’s measures to improve fiscal accounts after the worst budget deficit on record fueled gains in the stock market, according to Goes.

Still, Moody’s Investors Service signaled last week that those measures may not be enough to avoid a rating cut. Economic data has been worse than anticipated in the first half of the year, hindering tax increases and spending cuts by the government, Mauro Leos, Moody’s lead analyst for Brazil, said in an interview.

Commodity stocks posted the biggest slump among 10 industry groups in the MSCI Brazil Index. Vale SA, the world’s largest iron-ore producer, extended a three-day slide to 5.3 percent as prices for the steelmaking ingredient dropped.

Banco Bradesco SA trimmed gains after people with direct knowledge of the matter said HSBC Holdings Plc will probably sell its unprofitable Brazil unit to the lender for $3.2 billion to $4 billion. The shares added 0.1 percent.

Retailer Lojas Renner SA climbed 2.1 percent, leading advances among consumer stocks.

Trading volume of equities in Sao Paulo was 5.3 billion reais on Monday, according to data compiled by Bloomberg. That compares with a daily average of 6.97 billion reais this year, exchange data show.

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