Bovespa Index Tumbles as PDG Declines on Brazil Growth Concern

The Bovespa index declined the most in a week as PDG Realty SA Empreendimentos & Participacoes led losses among companies that sell locally on concern corporate earnings will falter amid a slowdown in Brazil’s growth.

Iron-ore producer Vale SA contributed the most to the benchmark’s decline, following metals lower after a gauge of manufacturing in China indicated an unexpected slowdown. Real-estate company Tecnisa SA dropped the most since November.

The Bovespa tumbled 0.9 percent to 56,883.99 at the close of trading in Sao Paulo, paring this week’s advance to 0.3 percent. Growth of Brazil’s gross domestic product slowed to 0.9 percent in 2012, the national statistics agency said today.

“Lower-than-expected GDP figures are pushing equities lower,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview. “They confirmed that 2012 wasn’t a very good year and also cast doubt on how 2013 will be.”

Brazil’s economic expansion in 2012 trailed major emerging markets from Russia to Mexico. To spur growth, President Dilma Rousseff’s administration has pledged to extend tax cuts and spark more private investment while taming inflation, which has exceeded the midpoint of the central bank’s target for more than two years.

Finance Minister Guido Mantega told reporters in Brasilia today that he expects GDP to grow between 3 percent and 4 percent in 2013.

Eighteen of 28 companies on the Bovespa index that have already reported fourth-quarter earnings missed analysts’ forecasts, according to data compiled by Bloomberg.

PDG, Tecnisa

PDG declined 5 percent to 3.05 reais. Tecnisa lost 3.9 percent to 8.40 reais, the most on a closing basis since Nov. 14. Vale fell 3.6 percent to 35.25 reais.

China’s Purchasing Managers’ Index of manufacturing slipped to 50.1 in February from 50.4 in the prior month, a report from the National Bureau of Statistics and China Federation of Logistics and Purchasing showed. The reading compares with the median forecast of 50.5 among 31 economists surveyed by Bloomberg. A figure above 50 means that activity increased.

Banco do Brasil SA, Latin America’s largest lender by assets, gained 1.8 percent to 26.82 reais after the central bank set new rules regarding implementation of Basel III capital requirements. Banks will be allowed to use deferred tax assets as capital, Luiz Awazu, a central bank board member, told reporters in Brasilia today.

Relative Value

The Bovespa has dropped 10 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has slid 4.2 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.6 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities, according to data compiled by Bloomberg.

Trading volume for stocks in Sao Paulo was 7.43 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.53 billion reais this year through Feb. 26, according to data compiled by the exchange.

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