Rousseff Rout Still Leaving Ibovespa Overvalued to UBS

For all the stock declines investors have seen in Brazil under President Dilma Rousseff, her re-election means there’s more losses in store before equities look attractive to UBS AG and USAA Investment Management Co.

After Brazil entered a recession this year and inflation soared past the top end of policy makers’ target, the Ibovespa is trading at a seven-month low of 9.8 times forecast earnings. Stocks won’t be attractive until valuations fall to about 8 times, according to UBS and USAA. The Ibovespa lost 5 percent today at 11 a.m. in Sao Paulo, poised for the biggest drop since 2011 and leaving the index set to enter a bear market.