Brazil's Stocks Advance as Low Valuations Lure Buyers After Rout

  • Currency drop bolsters outlook for Brazilian exporters
  • Petrobras leads gains following report on impact of crude drop

Brazil’s stocks rose from an almost seven-year low as cheap valuations lured investors with appetite for risk.

State-controlled oil producer Petroleo Brasileiro SA rose for the first time in five days after Banco Itau BBA SA said in a report that the company shouldn’t suffer much from plunging oil as about 60 percent of its revenue is not linked to international prices. Pulp producer Fibria Celulose SA led a rally by exporters as a weaker real boosted the outlook for international sales.

The Ibovespa is having its worst start to the year since 2008 as Latin America’s biggest economy heads toward its longest recession in more than a century, with above-target inflation and rising unemployment. The index has fallen 13 percent this year, second only in the region to Argentina’s Merval.

"The recent rout was exaggerated for some companies, which are better positioned to weather the crisis," Paulo Henrique Amantea, an analyst at brokerage H. H. Picchioni, said from Belo Horizonte, Brazil. "Banks are a good example of that. They always attract investors when valuations fall too much."

The Ibovespa climbed 0.2 percent to 37,717.11 at the close of trading in Sao Paulo as half of its 61 stocks advanced. The index is trading at 9.16 times estimated earnings, which is the lowest valuation since March 2014. Petrobras, as Petroleo Brasileiro is known, added 1.6 percent.

Fibria jumped 4.7 percent as the real weakened to the lowest since September. Brazil’s currency weakened as the central bank failed to increase its benchmark interest rate, fueling concern that the government is giving up on its battle to tame inflation amid the recession.

Freight company Rumo Logistica Operadora Multimodal SA was the worst performer on the benchmark equity index. Retailer Lojas Americanas SA fell the most on an MSCI gauge of consumer stocks, which fell to the lowest since 2004.

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