Brazil's Ibovespa Joins Global Rally as Valuations Lure Buyersby
Lender Itau Unibanco leads advance among financial companies
No solid recovery yet as economy remains fragile, analyst says
Brazil’s stocks rebounded from a six-year low, joining gains in emerging markets, as investors took advantage of low valuations after four straight days of losses.
The benchmark stock index also benefited from increased appetite for riskier assets globally after China stepped up efforts to support the yuan, easing concern of a hard landing in the Asian nation. Financial stocks led by lender Itau Unibanco Holding SA contributed the most to the Ibovespa’s advance. Insurance company BB Seguridade Participacoes SA was the best performer on the measure.
Investors are buying shares of companies they view as best positioned to whether the country’s economic slump amid forecasts for the worst recession in more than a century, according to Raphael Figueredo, an analyst at brokerage Clear Corretora. The Ibovespa traded at 9.6 times estimated earnings, the cheapest since February 2014, providing an attractive entry point for traders betting on a long-term recovery.
"There are some opportunities in the Brazilian market as this moment," Figueredo said from Sao Paulo. "But we can’t say a solid recovery trend is on the way. That’s also because investors are not willing to pay too much for the stocks. They’re only interested in bargains."
The Ibovespa added 0.5 percent to 40,149.04 at 12:48 p.m. in Sao Paulo as three stocks rose for every one that fell. Itau climbed 1.7 percent and BB Seguridade advanced 3.8 percent. Financial stocks are trading at 6.36 times estimated earnings, which is 38 percent below their 10-year average, according to data compiled by Bloomberg.
China repeatedly intervened in the offshore yuan market Tuesday, causing the cost of borrowing yuan in Hong Kong to surge and making it more expensive to bet on depreciation. The intervention helped stabilize Chinese stocks and reduce concern that turmoil in the nation’s stocks and currency would spread.
Gains were limited in Brazil as state-controlled oil producer Petroleo Brasileiro SA fell for a second consecutive day after reducing estimates for its output and cutting spending plans.
The Ibovespa fell for the third consecutive year in 2015 and has already lost 7.2 percent in 2016 as a political crisis fueled by a corruption scandal has paralyzed the economy by discouraging businesses and consumers.