BM&FBovespa Falls as Deutsche Bank Cuts to Hold: Sao Paulo Mover

BM&FBovespa SA, Latin America’s biggest exchange operator, fell the most in eight weeks after Deutsche Bank AG cut its rating on concern trading will decline as interest rates rise and investors sour on Brazilian stocks.

The shares declined 5.1 percent to 11.29 reais at the close of trading in Sao Paulo, the biggest drop since July 2. It was the worst performance on the MSCI Brazil/Financials index, which lost 3.3 percent.

Deutsche Bank cut its recommendation on the stock to hold from buy and reduced its forecast for net income next year by 18 percent. Brazil’s Ibovespa is the world’s second-worst performing major stock index this year in dollar terms, and the 25 percent drop in shares of BM&FBovespa is the most among securities-exchange operators with a market capitalization of $1 billion or more, data compiled by Bloomberg show.

“We are concerned about a potential slowdown in trading volumes in light of a rising interest rate environment and increased risk aversion towards Brazil,” analysts Mario Pierry and Tito Labarta wrote in a note to clients today.

Economists covering Brazil expect policy makers to raise the country’s benchmark interest rate to 9.50 percent by the end of this year, based on a weekly central bank survey released yesterday. That compares with a year-end forecast of 9.25 percent the previous week.

Trading Volumes

BM&FBovespa expects volume to decline in the third quarter after the average value of daily stock trades rose 8.5 percent to a record 8.3 billion reais during the three months ended in June, Eduardo Guardia, the company’s investment relations director, told reporters in Sao Paulo on Aug. 9.

Second-quarter trading was boosted by an increase in initial public offerings and market volatility. Brazil has had seven IPOs this year, compared with three in 2012, according to data compiled by Bloomberg.

Azul Linhas Aereas Brasileiras SA, the airline created by JetBlue Airways Corp. founder David Neeleman, canceled on Aug. 19 an initial public offering to raise as much as 1 billion reais because of unfavorable conditions. It was the second Brazilian company to cancel an IPO this year amid a market slump.

The Ibovespa, Brazil’s main equity gauge, has lost 18 percent this year, the most among global benchmarks, on concern over a decline in trading volumes and increasing competition.

Americas Trading System Brasil, a joint venture between Americas Trading Group and NYSE Euronext, filed a formal request in June to open an exchange that would break BM&FBovespa SA’s monopoly in stock trading in Brazil. The company expects to start operating in the first half of 2014, depending on regulatory approval, Chief Executive Officer Alan Gandelman said in a June 19 telephone interview from Sao Paulo.

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