Brazil’s Ibovespa Enters Bull Market Amid Election Outlook

The Ibovespa entered a bull market, completing a 20 percent rally from its March low, on speculation Brazil’s President Dilma Rousseff will be voted out of office after overseeing faltering economic growth.

State-controlled oil company Petroleo Brasileiro SA contributed the most to the index’s gain. For-profit college operator Anhanguera Educacional Participacoes SA surged as Kroton Educacional SA released new terms for its acquisition of the company, easing concern that the deal will collapse. Brewery Ambev SA, the Brazilian unit of Anheuser-Busch InBev NV, fell the most in a week as quarterly profit trailed estimates. Steelmaker Cia. Siderurgica Nacional SA followed metals lower.

The benchmark index added 0.5 percent to 54,052.74 at the close in Sao Paulo, with 40 stocks rising and 27 falling. The real gained 0.6 percent to 2.2167 per U.S. dollar. The Datafolha institute is preparing a new voter poll to be released today or later this week, according to a report on Brazil’s electoral court website.

“Rumors about new polls that could show voter support for Rousseff declining have been fueling the Ibovepa’s gain these days more than any other news,” Pedro Galdi, the chief analyst at brokerage firm SLW Corretora, said in a phone interview from Sao Paulo. “Investors would like to see a change in government and a change in the management of state-owned companies.”

Voter Preference

A survey by Datafolha conducted last month showed Rousseff’s voter preference fell to 38 percent from 44 percent.

Economists cut their 2014 and 2015 growth forecasts to 1.63 percent and 1.91 percent from 1.65 percent and 2 percent, respectively, a central bank survey published May 5 showed. Brazilian policy makers have lifted the key rate 375 basis points in the past year while annual inflation in April accelerated at the fastest pace since June, according to the median estimate of 21 analysts surveyed by Bloomberg.

While there’s no catalyst for Brazilian growth to pick up, the consensus is that company earnings will rebound this year and next, Peter Taylor, an emerging-market money manager at Aberdeen Asset Management, said in New York. Brazil is one of the “best-valued” emerging markets, he said.

Petrobras, as Petroleo Brasileiro is known, advanced 1.9 percent to 18.58 reais. Anhanguera jumped 6.3 percent to 15.10 reais while Kroton rallied 5.2 percent to 54.06 reais. CSN, as Cia. Siderurgica is known, slumped 3.5 percent to 8.93 reais.

Base Metals

The Bloomberg Base Metals 3-Month Price Commodity Index dropped 0.7 percent. Commodity producers account for about a third of the Ibovespa’s weighting, according to data compiled by Bloomberg.

The index fell as much as 0.5 percent earlier today as metals dropped and a smaller-than-expected decrease in industrial output added to speculation that the central bank will raise borrowing costs after the October election.

“We expect the central bank to continue raising Brazil’s benchmark interest rate this year,” Paulo Brito, an investment manager at the brokerage firm HPN Invest, said by phone from Recife, Brazil. “That would be bad for stocks because it encourages investors to shift to fixed income.”

Ambev fell 2.1 percent to 16.30 reais, its biggest drop since April 30. The company’s adjusted net income rose to 2.55 billion reais in the first quarter, compared with the average of nine analysts’ estimates in a Bloomberg survey of 2.79 billion reais.

Trading volume of stocks in Sao Paulo was 8.6 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 6.77 billion reais this year, according to data from the exchange.