Brazil's Bovespa Falls Most in 8 Months; Petrobras, Vale Drop

By Alexander Ragir

Sept. 15 (Bloomberg) -- Brazilian stocks tumbled the most in eight months, led by commodity producers, as the bankruptcy of Lehman Brothers Holding Inc. led investors to flee from riskier, emerging-market assets.

Banco do Brasil SA led declines for banks as the bankruptcy of Lehman, once the fourth-largest U.S. investment bank, fueled speculation that turmoil in the credit markets will deepen. Petroleo Brasileiro SA, Brazil's state-controlled oil company, slid the most since March as the price of crude dropped as much as $7 a barrel. Cia. Vale do Rio Doce paced a drop for raw- material producers as industrial metals plunged.

``It's clearly very negative what's happening in the U.S.,'' said Roberto Lampl, who helps manage $4 billion in emerging- market stocks at ING Investment Management in the Hague. ``At the moment you're seeing a lot of risk aversion and fund flow being negative for emerging markets.''

Brazil's Bovespa index slid 5.3 percent to 49,618.81 at 9:12 a.m. New York time, the biggest drop since Jan. 21. U.S. stock- index futures also tumbled, pointing to the steepest retreat by the Standard & Poor's 500 index since September 2002. The MSCI Emerging Markets Index dropped 2.1 percent.

Banco do Brasil slumped 3.3 percent to 21.70 reais.

Lehman was forced into bankruptcy after Barclays Plc and Bank of America abandoned takeover talks yesterday and the company lost 94 percent of its market value this year.

Global Market

``There's no direct effect at all in Latin America with Lehman,'' said Urban Larson, Latin America portfolio manager at F&C Management Ltd. in London, which oversees about $2.5 billion in stocks. ``But indirectly, it has a huge effect on global market conditions.''

Petrobras fell 7.6 percent to 30.50 reais as crude oil traded at a seven-month low.

Vale dropped 7.1 percent to to 34.67 reais. The S&P GSCI Index of 24 commodities fell 5 percent, extending its slide from July's record to 31 percent.

Brazil's Bovespa index has dropped 33 percent from its May 20 high as rising interest rates and falling commodity prices raised concern about economic growth.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.