Brazil Stocks Fall on Speculation Rousseff Ouster Is Less Likely

  • Opposition seen as not yet having votes needed for impeachment
  • Utilities among worst performers on Ibovespa benchmark

The Ibovespa fell to a three-week low on speculation that chances are fading for a change in Brazil’s government that many investors expect to help put the economy back on track.

Utilities and financials were the worst performers among 10 industry sectors after newspaper O Estado de S.Paulo reported that the number of lawmakers in favor of impeaching President Dilma Rousseff is still short of the minimum required to remove her from office. The head of the largest political party that remains in Rousseff’s coalition also said Tuesday that the party won’t immediately discuss leaving the alliance. The Ibovespa has gained 11 percent this year on bets that a new administration is the best hope to pull the country out of its worst recession in a century.

"Politics continue to be the main driver for Brazil’s stocks," Hersz Ferman, an analyst at the brokerage Elite Corretora, said from Rio de Janeiro. "The market is very cautious, waiting to see who will be the country’s leader in the next months. We should expect more volatility on the way."

The Ibovespa fell 2 percent to 48,096.24 at the close of trading in Sao Paulo as all but 13 of its 61 stocks declined. Five of the ten worst performers on the gauge were utilities.

CCR SA, the nation’s biggest road builder, fell 7 percent, the most since December. Lenders Itau Unibanco Holding SA and Banco Bradesco SA contributed the most to the gauge’s drop. The real gained 1.2 percent to 3.6369 per dollar.

Even after today’s decline, Brazil’s benchmark equity gauge is trading at 12.2 times estimated earnings, 7 percent above the average for emerging markets.

"It’s becoming consensus now that Brazilian stocks are expensive compared to the political risk, which is very big, and the economic scenario," Raymundo Magliano Neto, president of the brokerage Magliano Corretora, said from Sao Paulo.

After Brazil’s gross domestic product contracted 3.8 percent in 2015, the economy is forecast by analysts to shrink 3.7 percent this year with record high unemployment and above-target inflation.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE