Brazil Stocks Rise, Breaking Longest Losing Streak Since 2012

  • Valuations at lowest since December lure bargain hunters
  • Iron-ore miner Vale gains after announcing dividend cut

The Ibovespa rose for the first time in nine days, breaking its longest losing streak in three years, as valuations at the lowest since December lured bargain hunters.

Companies on the Ibovespa are trading at 10.3 times estimated earnings after stocks lost 9.5 percent in the eight days through Monday, data compiled by Bloomberg show. The selloff was sparked by concern the country won’t be able to avoid another credit-rating downgrade as President Dilma Rousseff struggles to get congressional approval for spending cuts and tax increases.

"After so many drops, traders are looking for companies that are good and cheap," Lauro Vilares, an analyst at brokerage Guide Investimentos, said from Sao Paulo.

The Ibovespa added 0.4 percent to 44,131.82 at the close of trading in Sao Paulo. Vale SA, the world’s biggest iron-ore miner, rose 0.2 percent after Banco Santander SA said a plan to cut dividends will help mitigate rising leverage and preserve cash amid lower demand from China. State-controlled oil producer Petroleo Brasileiro SA followed crude higher.

Tuesday’s respite probably won’t last as economic and political issues persist, Vilares said.

Latin America’s biggest economy will contract 2.8 percent this year and is heading toward its longest recession since the 1930s, according to a central bank survey of economists released Monday. Unemployment rose to 8.6 percent in July from 8.3 percent a month earlier, the national bureau of statistics said Tuesday.

All eyes are on the government before lawmakers vote Wednesday on whether to uphold Rousseff’s vetoes of spending increases. This current administration has failed to win support for effective measures to shore up the budget and restore growth, according to Adeodato Volpi Netto, the head of capital markets at the equity research firm Eleven Financial. Brazilian assets will continue to drop and the economy will worsen until there’s a solid signal of political good will to put the country back on track, he said.

“The market just lost all its patience with this administration,” Volpi Netto said from Sao Paulo. “We should fasten our seat belts, because the pilot is gone."

Air carrier Gol Linhas Aereas Inteligentes SA declined to the lowest price on record after Moody’s Investor Service cut its credit-rating outlook to negative from positive. Steelmaker Gerdau SA fell the most on the Ibovespa, extending a two-day slump to 7 percent.

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