Ibovespa Falls as Brookfield Drops on Brazil Rate ConcernNey Hayashi
The Ibovespa fell the most in a month on concern that higher interest rates in Brazil will drive investors away from equities and into fixed-income assets.
Homebuilder Brookfield Incorporacoes SA tumbled the most since May 2012, while competitors PDG Realty SA and Gafisa SA were among the worst performers on the Ibovespa. Online retailer B2W Cia. Digital slumped the most on the benchmark gauge. Freight shipping company All America Latina Logistica SA fell after Folha de S.Paulo reported that the government may revoke its rail contract.
The Ibovespa declined 2.3 percent to 50,341.25 at the close of trading in Sao Paulo. The real depreciated 1.2 percent at 5:21 p.m. local time, touching a four-month low of 2.4 per U.S. dollar as the central bank’s scaled-back intervention program reduced support for the currency. Swap rates, a gauge of expectations for interest-rate moves, climbed on most contracts.
“A weaker currency puts pressure on inflation, which may prompt the central bank to keep raising interest rates,” Pedro Galdi, the head strategist at brokerage firm SLW Corretora in Sao Paulo, said in a phone interview. “And the higher the rates, the lower equities go.”
The central bank has raised borrowing costs by 2.75 percentage points to 10 percent since April as inflation remained above the government’s 4.5 percent target and deteriorating fiscal accounts sparked concern that the country’s credit rating will be reduced.
The real fell after Brazil sold $199 million of currency swaps under a program announced Dec. 18 to auction $200 million each trading day until at least June 30. The central bank offered $500 million four days a week in 2013.
The BM&FBovespa Real Estate index retreated 2.7 percent to the lowest level since 2009. Brookfield tumbled 11 percent to 1.02 reais. PDG lost 6.6 percent to 1.69 reais. Gafisa declined 7.9 percent to 3.25 reais.
B2W dropped 12 percent to 13.50 reais, the biggest one day decline since October 2008.
All America lost 4 percent to 6.30 reais as Folha de S.Paulo reported, without saying where it got the information, that President Dilma Rousseff called a meeting for Jan. 6 to discuss the company. All America’s press office didn’t immediately respond when Bloomberg News asked for comment.
State-run oil company Petroleo Brasileiro SA fell 1.9 percent to 16.75 reais after saying its output in Brazil was unchanged in November from October. It was a “weak month” for the producer, Banco Itau BBA SA’s analysts Paula Kovarsky and Diego Mendes wrote in a research note to clients.
Brazil’s benchmark stock gauge declined 27 percent in dollar terms in 2013, the worst performance among the 20 biggest equity indexes tracked by Bloomberg. The MSCI Emerging Markets Index dropped 5 percent.