Ibovespa Drops as Slower China Growth Dims Export Outlook

The Ibovespa retreated from a three-week high as a report that showed the pace of Chinese manufacturing slowed last month rekindled concern that growth will falter in Brazil’s top trading partner.

Mining company Vale SA, whose biggest export market is China, fell from a two-week high. Insurer Sul America SA declined for a third session after reporting first-quarter earnings that trailed analysts’ estimates. OGX Petroleo e Gas Participacoes SA, the oil company controlled by the billionaire Eike Batista, fell the most on the gauge, extending a two-session drop to 16 percent.

Brazil’s benchmark equity index lost 1.1 percent to 55,321.93 at the close of trading in Sao Paulo. Fifty-four stocks declined on the gauge while 14 advanced.

“We had weak economic data in China, which is an important trading partner for Brazil, and that’s having a negative impact on the market,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro.

China’s Purchasing Managers’ Index fell to 50.4 in April from 51.6 a month earlier, according to HSBC and Markit Economics. That compares with the median estimate of 50.5 among economists surveyed by Bloomberg. Readings above 50 signal expansion.

Vale fell 2.7 percent to 31.75 reais. OGX sank 6.2 percent to 1.83 reais after earlier today slumping as much as 10 percent. The MSCI Brazil/Materials index was the worst performer among 10 industry groups. The real fell 0.4 percent to 2.0092 per dollar amid concern that a slowdown in China will hit currencies of commodity-exporting countries, said Vladimir Caramaschi, chief strategist at Credit Agricole Brasil SA DTVM.

Growth Concern

“Markets are being affected by concerns about the pace of global growth,” Caramaschi said in a phone interview from Sao Paulo.

Sul America dropped 4.8 percent to 14.10 reais. The company posted adjusted net income of 23.6 million reais in the first quarter, trailing the average forecast from analysts of 85.5 million reais, according to data compiled by Bloomberg.

“The figures released yesterday may increase market concerns over a potential deterioration in the company’s operating performance” in the second quarter, Banco Espirito Santo de Investimento SA’s analysts Gustavo Schroden and Mateus Renault wrote in a report today.

Ibovespa Valuation

The Ibovespa has retreated 13 percent from this year’s peak 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 lost 6 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.4 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 8.18 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.68 billion reais this year through April 29, according to data compiled by the exchange.

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