Ibovespa Gains for Fourth Session as Cemig Leads Utilities Surge

  • Data from grid operator show reservoir levels increasing
  • Stocks of commodity producers track raw materials prices lower

The Ibovespa capped its longest winning streak in 10 weeks as Cia. Energetica de Minas Gerais led a rally in power utilities after a report showed levels in reservoirs feeding hydropower plants increased in January following last year’s drought.

Cemig, as Cia. de Minas Gerais is known, jumped the most since 1999, with the BM&FBovespa’s Electrical Energy Index of 15 publicly-traded utilities extending a four-day rally to 16 percent.

After a drought sapped reservoirs last year, spurring concern that power shortages could weigh on an already slowing economy, rainfall in the past few months made investors more confident about the outlook for the industry, said Rafael Ohmachi, an analyst at Guide Investimentos brokerage. Levels of reservoirs in the Southeast/Central-West regions, which account for 70 percent of maximum installed capacity, rose to 44.4 percent of their total capacity as of Jan. 31, according to Brazil’s grid operator ONS. That compares with an average level of 16.8 percent in Jan. 2015, the data show.

“There’s a perception in the market that risks for the industry are less significant now, and many investors are turning to these companies again,” Ohmachi said in a phone interview. “It’s a sector worth watching more closely.”

The Ibovespa rose 0.4 percent to 40,570.04 at the close of trading in Sao Paulo, with 40 stocks higher and 19 lower, after earlier losing as much as 1.7 percent amid concern that growth will falter in China, Brazil’s main trading partner. Pulp producers Suzano Papel e Celulose SA and Fibria Celulose SA slumped more than 5 percent.

Retailer Lojas Americanas SA lost 1.3 percent after economists in the central bank’s weekly survey estimated gross domestic product will drop 3.01 percent in 2016. That compares with a previous reading of 3 percent. Their forecast for growth next year was also cut to 0.7 percent from 0.8 percent.

Airline Gol Linhas Aereas Inteligentes SA surged 50 percent, the most on record, after a report that the federal government may allow more foreign investment in Brazilian airlines, spurring speculation that Delta Air Lines Inc. could increase its stake.

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