Brazil Stocks Drop as Currency Appreciation Dims Fibria Outlook

  • Real advances to strongest in two weeks on government victory
  • Oil producer Petrobras declines as crude oil erases gains

The Ibovespa halted a five-day rally as gains in Brazil’s currency worsened prospects for companies that depend on revenue from overseas.

Pulp producer Fibria Celulose SA declined to its lowest price since October 2014 and meatpackers Marfrig Global Foods SA and JBS SA were among the worst performers on the equity index. Brazil’s currency rose as Acting President Michel Temer scored a victory in getting the Senate to approve a bill aimed at improving transparency at companies run by the government. Crude producer Petroleo Brasileiro SA slumped as oil erased gains.

Companies that depend on exports are the worst performers on the Ibovespa index this year, with Fibria down 50 percent and planemaker Embraer SA 40 percent lower as the real posts the world’s biggest currency gain. That represents a turnaround from last year, when a tumbling real boosted the prospects of companies that earn in dollars.

"Exporters are being dragged down because of the currency appreciation, so caution is the watchword on the market," Bernardo Rodarte, who oversees 1 billion reais ($296 million) of assets at Sita Corretora, including Suzano shares, said from Belo Horizonte. "The local scenario is not all that positive as we face the worst recession in a century and the prospects for our exporters in general are discouraging." 

The Ibovespa declined 1.3 percent to 50,156.30 on Wednesday. Fibria lost 4.2 percent, and Marfrig dropped 1.7 percent. Petroleo Brasileiro, which is known as Petrobras, fell 2 percent.

For-profit college manager Kroton Educacional SA sank 3.2 percent as rival Ser Educacional SA was said to plan an improved offer for university Estacio Participacoes SA.

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