Ibovespa Falls Most in the World as PDG Tumbles on Brazil Growth

The Ibovespa fell the most in dollar terms among the world’s major equity benchmarks as PDG Realty SA Empreendimentos & Participacoes led consumer stocks lower after Brazil’s economy expanded less than forecast for a fifth quarter.

OGX Petroleo & Gas Participacoes SA, the oil producer controlled by the billionaire Eike Batista, fell the most on the gauge as crude slid. Batista’s mining company MMX Mineracao & Metalicos SA led declines by material producers. Gafisa SA rose after newspaper Valor Economico reported that the homebuilder may sell its Alphaville Urbanismo unit in early June.

The Ibovespa fell 2.5 percent to 54,634.69 at the close of trading in Sao Paulo. Sixty-three of the 71 stocks on the gauge dropped. Brazil’s gross domestic product increased 1.9 percent in the first quarter of 2013 from the same period last year, below the median estimate of 2.3 percent growth among 42 economists surveyed by Bloomberg.

“That’s a weak number that will make the market, entrepreneurs and investors cut their estimates for the Brazilian economy this year,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro.

Finance Minister Guido Mantega told reporters in Brasilia today that the government may review its projection of 3.5 percent growth for the economy this year. Brazilian swap rates on the contract due in January fell seven basis points, or 0.07 percentage point, to 8.06 percent as the slower-than-forecast GDP growth fueled speculation that the central bank will limit increases in borrowing costs today.

Target Rate

Policy makers raised the benchmark Selic rate last month for the first time since July 2011, increasing it by a quarter-percentage point to 7.5 percent. Thirty-eight of the 57 economists surveyed by Bloomberg project another increase of 25 basis points today, while the rest expect an increase of 50 basis points to 8 percent.

“Brazil faces a very challenging scenario of low growth and the need to raise interest rates as inflation remains high,” Luis Gustavo Pereira, an analyst at brokerage Futura Corretora in Sao Paulo, said in a phone interview. “The currency is also weakening and will weigh on price indexes as well. Investors just don’t want to enter the market under such an uncertain scenario.”

The real weakened 1.7 percent to 2.1106 per U.S. dollar as Mantega said the declines aren’t a concern. Airline Gol Linhas Aereas Inteligentes SA, which has about 73 percent of its debt denominated in dollars, slumped 8.1 percent to 9.95 reais, the lowest closing price since Nov. 28.

Brazilian Inflation

Brazilian consumer prices as measured by the IPCA index increased 6.49 percent in April from a year earlier, according to the bureau of statistics. Economists predict inflation will end this year at 5.8 percent, according to a central bank survey released May 27.

PDG declined 5.8 percent to 2.45 reais, the worst performance on the MSCI Brazil/Consumer Discretionary Index, which sank the most among 10 industry groups.

The Standard & Poor’s GSCI index of 24 raw materials dropped 1.1 percent after the International Monetary Fund cut economic growth projections for China, the world’s biggest consumer of raw materials. Commodities producers account for about 39 percent of the Ibovespa’s weighting.

OGX sank 9.6 percent to 1.50 reais. MMX retreated 6.4 percent to 1.90 reais.

Gafisa Gains

Gafisa rose 2.5 percent to 4.08 reais. The homebuilder will make a decision on the Alphaville sale in the first half of June, Valor reported today, citing a source it didn’t name. A press official for Gafisa declined to comment on its plans for Alphaville when contacted by Bloomberg News.

The Ibovespa has declined 10 percent this year, the worst performance among major emerging-market stock gauges, amid concern quickening inflation will curb the nation’s economic recovery. Brazil’s main equity index trades at 12.9 times analyst earnings estimates for the next four quarters, compared with a multiple of 10.8 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 7.62 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.67 billion reais this year, according to data compiled by the exchange.

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