Ibovespa Posts Longest Losing Streak Since 2012 as China Weighs

  • Brazil will contract 2.8% this year, economists estimate
  • Exports may also be at risk as Chinese growth decelerates

The Ibovespa capped its longest losing streak since 2012 as analysts turned more pessimistic on Brazil’s economy amid signs of a slump in China, its biggest trading partner.

Brazil’s benchmark equity gauge slumped for an eighth straight day, reaching the lowest since 2009, after economists covering Brazil forecast that the country’s gross domestic product will shrink 2.8 percent this year. That’s a more gloomy view than in the previous weekly poll by the central bank, which projected a decline of 2.7 percent.

The Ibovespa has plunged 42 percent this year in dollar terms, the worst performance among the world’s major equity markets, as Brazil heads toward its longest recession since the 1930s amid above-target inflation and a political stalemate that has frustrated the government’s efforts at shoring up the budget. Sentiment worsened Monday after data showed industrial profits in China declined the most since 2011, dimming the outlook for Brazil’s raw-materials exporters.

"Everywhere you look, there’s reason for concern," Alvaro Bandeira, an economist at Banco Modal, said from Rio de Janeiro. "And no hope of an improvement any time soon."

The Ibovespa fell 2 percent to 43,956.63 at the close of trading in Sao Paulo as 52 of its 64 stocks dropped. Iron-ore miner Vale SA, whose main clients are Chinese steelmakers, was the biggest contributor to the gauge’s decline. Retailer Via Varejo SA fell the most on the MSCI Brazil/Consumer Discretionary Index.

Traders have turned bearish on Brazil as the government struggles to persuade Congress to approve measures that include tax increases and spending cuts to avoid further downgrades of its credit rating. While Standard & Poor’s reduced the country to junk on Sept. 9, Fitch Ratings says the probability of Brazil losing its BBB grade is higher than 50 percent.

Exporters that stand to benefit from a weaker real, the best performers on the Ibovespa this year, gained again Monday as the currency slumped, making their goods more competitive in dollar terms. Planemaker Embraer SA climbed 0.7 percent; Marfrig Global Foods SA, Brazil’s second-largest beef producer, rose 0.3 percent.

"Those companies are the most resilient at this moment," Raphael Figueredo, an analyst at the brokerage Clear Corretora, said from Sao Paulo. "They should continue gaining as the real depreciates."

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