Brazil's Stocks Fall to Lowest Since '09 as Petrobras, Vale Sinkby
Ibovespa joins emerging markets rout on commodity decline
Investors are discouraged by both external, domestic outlooks
Brazil’s stocks fell to the lowest level in almost seven years, joining a rout in emerging markets Wednesday, as a slump in commodity prices dimmed the outlook for raw-materials producers including Petroleo Brasileiro SA and Vale SA.
Petrobras, as the state-controlled oil producer is known, and miner Vale were among the biggest contributors to the benchmark Ibovespa’s drop. Brent crude declined to the lowest in 11 years and a Standard & Poor’s index of commodities retreated for a third day. China’s devaluation of its yuan also helped to cloud prospects for Brazilian exporters, as the Asian country is its biggest trading partner. Metalurgica Gerdau SA, the parent of Latin America’s largest steelmaker, plunged 13 percent.
Forty-two of the Brazil benchmark equity index’s 61 members fell Wednesday. An MSCI index of consumer stocks touched the lowest intraday level since September 2009 as Latin America’s biggest economy is forecast to face the worst recession since at least 1901.
“Investors seem to be avoiding the risk of Brazilian companies as 2016 is expected to be a very negative year,” Rafael Ohmachi, an analyst at the brokerage Guide Investimentos, said from Sao Paulo. “Bad news is coming from everywhere. It’s very hard to make any kind of bet now.”
The Ibovespa dropped 1.5 percent to 41,773.14 at the close of trading in Sao Paulo, its lowest level since March 2009. The gauge traded at 9.9 times estimated earnings, or 11 percent below its three-year average. Petrobras declined 4.2 percent to 6.40 reais, and Vale fell 7.6 percent to 9.15 reais. Raw-materials producers account for about a fifth of the weighting of Brazil’s main equity gauge.
Meatpacker JBS SA lost 9.2 percent to 10.40 reais after newspaper Estado de S.Paulo cited Grupo Bertin, a former JBS shareholder, in a story on Carwash corruption case. JBS declined to comment on report.
Economic activity, as well as business and consumer confidence have sunk amid a political crisis fueled by a widening corruption scandal. President Dilma Rousseff is fighting an impeachment request amid allegations of mismanaging the country’s budget, while Finance Minister Nelson Barbosa, who assumed the post in December, has faced increasing pressure to moderate austerity proposals intended to bolster public accounts and avoid further credit downgrades.