Ibovespa Gains Fourth Day as PDG Leads Homebuilder Rally

The Ibovespa rose for a fourth day, the longest streak of gains in three weeks, as PDG Realty SA Empreendimentos e Participacoes led a rally by homebuilders amid speculation that this year’s slump may have been excessive.

Tobacco company Souza Cruz SA gained after JPMorgan Chase & Co. raised its recommendation to the equivalent of buy. Oil company Petroleo Brasileiro SA fell the most in five weeks even after its second-quarter profit exceeded analysts’ estimates.

The Ibovespa added 0.9 percent to 50,299.49 at the close of trading in Sao Paulo. Forty-three stocks rose on the index while 28 fell. The real weakened 0.7 percent to 2.2880 per dollar at 5:24 p.m. local time. PDG jumped 8.9 percent to 1.96 reais, paring this year’s slump to 41 percent.

“The index is being pushed higher by companies that, even with fundamentals that aren’t particularly impressive, were oversold,” Rodolfo Amstalden, an equity analyst at consulting firm Empiricus Research, said by phone from Sao Paulo.

PDG’s competitor Gafisa SA added 3.8 percent to 3.02 reais even after posting a net loss of 14.1 million reais in the second quarter, which compared with an average estimate for a loss of 12.1 million reais among six analysts surveyed by Bloomberg.

While Gafisa still faces “important challenges” in order to boost profitability, its discount relative to peers including PDG is “suggesting some potential catching up,” analysts at Banco Bradesco SA’s brokerage unit including Luiz Mauricio Garcia wrote in a note to clients today.

Petrobras Earnings

Souza Cruz rose 1.6 percent to 26.25 reais.

Petrobras lost 3.2 percent to 16.53 reais, erasing gains of as much as 3.4 percent. The company said that gasoline and diesel imports will rise in the second half of the year because of refinery shutdowns.

The state-run oil producer reported adjusted earnings of 48 centavos per share, compared with an average estimate of 45 centavos among 13 analysts surveyed by Bloomberg.

“When a big name such as Petrobras reports good results, it helps to create a more optimistic view for the equity market in general,” Fabio Cardoso, a partner at Rio de Janeiro-based equity advisory firm Adinvest Consultoria, said in a phone interview. “The Ibovespa may be capable of sustaining gains for a while from now on.”

The Ibovespa slumped 18 percent this year through Aug. 9, wiping out $222 billion from the value of Brazilian stocks, according to data compiled by Bloomberg. The gauge trades at 12.5 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 8.84 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.58 billion reais this year through Aug. 6, according to data compiled by the exchange.

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