Brazil Stocks Fall as Recent Gain Deemed Excessive Amid Slowdown

  • Ibovespa most expensive since 2013 versus emerging markets
  • Lender Bradesco contributes most to drop as Vale Climbs

Brazilian stocks halted a two-day rally amid speculation that recent gains may have been excessive amid the worst economic recession in a century.

The Ibovespa erased gains after its valuation jumped to 15.5 times estimated earnings, or 24 percent above the multiple for emerging-market stocks, according to data compiled by Bloomberg. That’s the widest gap since 2013. Banco Bradesco SA, Brazil’s No. 2 bank by market value, sank after setting aside 836 million reais ($240 million) to cover souring loans to a single client. Vale SA, the world’s largest iron-ore producer, rallied after reporting profit that beat analysts’ estimates.

Brazilian stocks have led gains among the world’s biggest equity markets this year amid speculation that President Dilma Rousseff will be ousted, paving the way for a new administration that could be more successful in reviving the economy. While Rousseff’s exit is still the most probable scenario on the political side, the impeachment process is a long one, said Joao Pedro Brugger, a money manager at Leme Investimentos.

“There’s some profit taking going on after such sizable gains,” Brugger said from Florianopolis, Brazil. “The impeachment is not a done deal, and there’ll be a lot of instability until all this is over.”

The Ibovespa declined 0.3 percent to 54,311.96 at the close of trading in Sao Paulo, after earlier rising as much as 0.9 percent. Cosmetics seller Natura Cosmeticos SA fell the most on the index after reporting a first-quarter loss. Bradesco dropped 2.1 percent, while Vale climbed 1.8 percent.

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