Brazilian Stocks Fall as Investors Eye Post-Impeachment Growthby
Senate voted to remove President Dilma Rousseff from office
Commodity producers are among index’s biggest losers Wednesday
Brazilian stocks fell, led by a drop in commodities companies, as equity investors turned their attention to seeking concrete signs that the economy is improving after President Dilma Rousseff was impeached following months of political turmoil.
The benchmark Ibovespa index dropped the most in more than a week as state-controlled oil producer Petroleo Brasileiro SA, which has advanced more than 90 percent this year, followed crude prices lower. Lender Itau Unibanco Holding SA contributed the most to the index’s decline, and cosmetics seller Natura Cosmeticos SA was the worst performer among companies that depend on local demand.
The permanent replacement of the country’s leader by former Vice President Michel Temer had already been priced into stocks, and fresh gains may now depend on the new economic team’s ability to implement its economic platform. The administration is seeking to tame inflation, pull Brazil out of its worst recession in a century and trim the country’s budget deficit following the loss of its investment-grade credit rating last year.
"Now, it’s a new game that begins," said Frederico Sampaio, the head of equities trading at the Brazilian unit of Franklin Resources Inc. in Sao Paulo. "The tailwind provided by the impeachment has been exhausted, and the big question now is whether Temer will be able to convince politicians and society about the necessary measures to take."
The Ibovespa fell 1.2 percent to 57,901.11 at the close of trading in Sao Paulo. Petrobras, as Petroleo Brasileiro is known, lost 1.8 percent, Itau declined 2.1 percent and Natura retreated 3.2 percent. Miner Vale SA dropped to the lowest price since July 25 as iron ore fell.
The index is trading at 13 times estimated earnings, close to the highest level in four months. Some investors deem the valuations pricey as the most recent data underscore the weakness in the economy. Brazil’s national bureau of statistics reported that gross domestic product contracted 0.6 percent in the three months ended in June, more than the median estimate of a 0.5 percent drop among economists surveyed by Bloomberg.