Ibovespa Advances as Oi Leads Telecom Rally on Antitrust Ruling

The Ibovespa rose for the second time in three days as Oi SA led a rally in telecommunications companies after Brazil’s antitrust regulator approved its planned merger with Portugal Telecom SGPS SA.

The MSCI Brazil/Telecommunication Services Index increased to the highest since October as Oi gained a fifth day and wireless carrier Tim Participacoes SA climbed. Raia Drogasil SA advanced after Bank of America Corp. raised the drugstore chain to buy.

The Ibovespa climbed 0.6 percent to 49,703.10 at the close of trading in Sao Paulo, with 45 of its 72 member stocks higher. The real rose 0.2 percent to 2.3524 per dollar at 5:25 p.m. local time. Brazil’s antitrust regulator Cade approved Oi’s deal with Portugal Telecom without restrictions, allowing the carriers to form a company with 100 million customers.

“Cade’s approval pushes Oi higher, with investors betting that the merger will create a big company, with more power to face its competitors,” Pedro Galdi, the head strategist at SLW Corretora in Sao Paulo, said in a phone interview.

Cade said in a statement that the merger won’t affect competition because Portugal Telecom doesn’t hold interests in phone companies operating in the Latin American country besides a stake it already owns in Oi. The securities regulator CVM is still considering whether Oi’s controlling shareholders should participate in pricing assets being sold as part of the deal. A preliminary decision obtained by Bloomberg News last week said the majority owners should be excluded from the process.

Estacio, Gerdau

Oi rose 2.8 percent to 4.40 reais, extending this year’s rally to 23 percent, the best performer on the Ibovespa in 2014. Tim gained 0.7 percent to 13.39 reais. Raia Drogasil added 3.1 percent to 14.75 reais.

For-profit university Estacio Participacoes SA increased 3.1 percent to 19.80 reais after Brazil’s Education Ministry canceled licenses of some Rio de Janeiro-based competitors. The decision may benefit Estacio as it may be able to enroll some of the students coming from the schools that were shut down, Banco BTG Pactual SA analysts J.C. Santos and Pedro Montenegro wrote in a note to clients today.

Embraer SA climbed 2.8 percent to 19.84 reais. Avianca Brasil Chief Executive Officer Jose Efromovich said today in Sao Paulo that the airline is still in talks with the plane maker to buy about 30 aircrafts.

The Ibovespa’s gains were limited as steelmaker Gerdau SA led raw-material producers lower as metal prices declined. The Bloomberg Base Metals 3-Month Price Commodity Index slipped 0.2 percent. The MSCI Brazil/Materials index sank 0.8 percent, the second-worst performance among 10 industry groups.

Gerdau dropped 2.5 percent to 17.20 reais.

Brazil’s benchmark equity gauge slumped 27 percent in dollar terms in 2013, the worst performance among the 20 biggest equity indexes tracked by Bloomberg, as the central bank boosted borrowing costs to curb inflation that exceeded the government’s target for a third consecutive year.

Trading volume of stocks in Sao Paulo was 5.65 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 7.42 billion reais in 2013, according to data available from the exchange.

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