Brazil’s Steelmakers Lift Ibovespa as Credit Suisse Touts Gerdau

  • Producer Gerdau is the bank’s favorite in Latin America
  • Recommendation cites potential industrial production rebound

The Ibovespa rose to the highest level since May 2015 as Gerdau SA led a rally in steelmakers after Credit Suisse Group AG recommended buying the stock, saying demand for the industrial metal is set to rebound.

Gerdau and its controlling shareholder, Metalurgica Gerdau SA, were among the best performers on the benchmark equity index, along with rival Cia. Siderurgica Nacional SA. Usinas Siderurgicas de Minas Gerais SA climbed as much as 5.3 percent before paring gains by the end of the day amid a plan to push out maturities on its dollar bonds as part of a broader debt restructuring, according to people with knowledge of the matter. Weg SA, an industrial machinery manufacturer, touched its highest intraday price since December.

The Ibovespa has surged 64 percent this year in dollar terms -- the most in the world -- as Brazilian assets rallied on speculation a new government will be able cut budget deficits and pull the country out of its worst recession in a century. Emerging-market stocks got another boost as oil trading above $40 a barrel boosted energy producers.

"The mood is much more positive in Brazil now with the optimism that the country is recovering," Ari Santos, a stocks manager at the brokerage H.Commcor, said from Sao Paulo. "The prospects for companies are improving."

The Ibovespa added 0.9 percent to 57,593.89 at the close of trading in Sao Paulo as 42 of its 59 stocks gained. Gerdau and Metalurgica Gerdau climbed more than 2.8 percent. Cia. Siderurgica rose 2.6 percent. Weg gained 1.1 percent.

Analysts at Credit Suisse led by Ivano Westin wrote in a note to clients Aug. 3 that steel consumption has reached a bottom in Brazil and demand should increase in 2017 as industrial production rebounds. Gerdau is the bank’s top pick in Latin America.

Brazil’s gross domestic product contracted 3.8 percent last year and is estimated to shrink 3.4 percent in 2016. Acting President Michel Temer replaced Dilma Rousseff in May, vowing to shore up the country’s finances and restore growth.

Petrochemicals maker Braskem SA surged 11 percent, the most since July 2015, after releasing second-quarter earnings. Lender Banco do Brasil SA gained the most among banks after people familiar with the matter said it’s planning to sell a stake in Argentine unit Banco Patagonia SA. Power utility Cia. Energetica de Minas Gerais, known as Cemig, extended a two-day advance as its management submitted to the board a plan to sell a stake in Transmissora Alianca de Energia Eletrica SA.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE