Gerdau in World-Best Rally as Bank of America Says Buy on Brazilby
Steelmaker surges 12% in Sao Paulo, leading global peers
Gerdau was raised to buy from underperform by BOFAML
Gerdau SA rose the most among major steelmakers as Bank of America Merrill Lynch recommended buying the Brazilian company as a way of tapping a growth recovery in the country.
Shares in Porto Alegre, Brazil-based Gerdau surged 12 percent at 11:21 a.m. in Sao Paulo, leading gains among the 43 members of the BI Global Steel Producers Competitive Peers index, which rose 3 percent.
Gerdau was raised to buy from underperform by BOFAML analyst Felipe Hirai, while local peers Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional SA were kept at underperform. Usiminas gained 2.2 percent and CSN rose 2.3 percent as stocks jumped around the world after Federal Reserve Chair Janet Yellen reasserted the central bank’s gradual approach to raising interest rates.
“Steels have become a beta play on Brazilian equities, but we are concerned with the high leverage at CSN and Usiminas,” Hirai wrote. “We prefer long steel, as it should benefit from a growth recovery in Brazil and Gerdau is closer to cash flow breakeven.”
Producers in Brazil are curtailing high-cost output and attempting to sell assets amid deepening losses and surging credit costs as a global glut is exacerbated by the country’s deepest recession in more than a century.