Brazil Stocks Extend Best Month in 16 Years on Impeachment Bets

  • Ibovespa also joins emerging-market gains on Fed's signals
  • Gerdau soars after Bank of America recommends buying

The Ibovespa extended its biggest monthly rally in 16 years on speculation Brazil is moving closer to a change in government and as emerging-market assets climbed.

Brazilian stocks have soared 20 percent in March as President Dilma Rousseff faced a wave of protests against her government amid the worst recession in a century and criticism that she was trying to shield her predecessor and mentor from a corruption investigation. On Tuesday, Brazil’s largest party left her governing coalition, boosting wagers on an impeachment.

“There’s expectation that more parties will follow PMDB and leave the president,” said Jason Vieira, the chief economist at Infinity Asset Management in Sao Paulo. “Investors don’t care who the leaders are. They’re interested in seeing an improvement in economic policies.”

The Ibovespa added 0.2 percent to 51,248.93 at the close of trading in Sao Paulo, reaching the highest level since July. It also joined a rally that sent shares from Shanghai to Russia and South Africa climbing on speculation that the Federal Reserve will lift interest rates gradually, boosting the appeal of riskier assets. Steelmaker Gerdau SA surged 11 percent after Bank of America Corp. recommended buying the stock.

The impeachment rally may be short lived, though, as the economy contracts, according to Nick Robinson, the head of Brazilian equities at Aberdeen Asset Management Plc.

"Once investors are over the initial euphoria and reality returns, we would not be surprised to see some of the recent gains given back,” Robinson wrote in a note to clients Wednesday.

Brazil’s benchmark equity index is trading at 13.2 times estimated earnings, its highest level since May and 11 percent above the emerging-market index’s valuation.

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