Brazil's Bovespa Jumps 13%, led by Homebuilders; Bolsa Climbs

By Alexander Ragir and William Freebairn

Oct. 28 (Bloomberg) -- Brazilian stocks rallied the most in two weeks, joining an advance in equities around the world, after commodity prices rose and the government said it will announce measures to help homebuilders weather the credit crisis.

Gafisa SA and Cyrela Brazil Realty SA Empreendimentos e Participacoes jumped more than 29 percent after the Finance Minister said the government is ready to spend 3 billion reais to help homebuilders. Lojas Americanas SA led gains for retailers on the prospect that interest rates may fall next year. Cosan SA Industria e Comercio, the world's second-biggest sugar-cane processor, rose the most in three years after analysts said sugar prices may remain stable even as global growth slows.

``This sharp decline the past four months doesn't reflect the moment Brazil is living in right now,'' said Otavio Vieira, who helps manage the equivalent of $550 million at Safdie Private Banking in Sao Paulo. ``We aren't as vulnerable to a slowdown as the market makes it seem. Brazil can use sovereign reserves, ease bank requirements that are still very strict, lower interest rates, and other moves that can help certain sectors.''

The Bovespa index rebounded from a three-year low, rising 13 percent to 33,386.65, its biggest jump since Oct. 13.

Mexico's Bolsa surged 10 percent. The rally in Latin American stocks follows gains in U.S., European and Asian markets, as cheap valuations lured investors back into equities. The MSCI World Index added 7 percent. The MSCI Emerging Markets Index rose 7.7 percent.

Bovespa at 52,500

The price of companies on the Bovespa dropped to 6.99 times earnings yesterday, almost two-thirds cheaper than the 17.37 price-to-earnings investors paid on May 23, according to Bloomberg data.

``It's really cheap at this level but that doesn't mean it will rally back to were it was,'' said Debora Morsch, who helps manage the equivalent of $305 million at Solidus Brokerage in Porto Alegre, Brazil.

Brazil's central bank may halt six months of interest-rate increases as the credit crunch slows economic growth. Policy makers will keep the benchmark interest rate at 13.75 percent at the Oct. 28-29 meeting, according to 14 of 25 economists in a Bloomberg survey. The others expect the central bank to raise rates for a fifth straight time.

``Despite the bad scenario we anticipate for the U.S. and Brazilian economies in 2009, we see room for market performance based on the expectation of recovery, especially in 2H09, when we should already start seeing reductions in the Brazilian interest rate,'' wrote analysts at Bradesco Corretora, the research arm of Brazil's biggest non-state bank. The Bovespa may rise 78 percent by the end of 2009 to 52,500, they said.

Retailers Jump

Retailers gained on speculation lower borrowing costs would boost consumer spending. Lojas Americanas, Brazil's biggest discount retailer, soared 28 percent to 5.89 reais. Rival Lojas Renner rose 11 percent to 18.57 reais.

Renner has ended efforts to buy Leader SA Empreendimentos e Participacoes after failing to renegotiate the price as a result of the global credit crisis. Renner and Leader agreed to end the deal without liability for either party, Renner said yesterday. Renner's cancellation is ``great news,'' Citigroup analysts said.

Mantega, speaking in Brasilia today, said the government will announce the details of a plan for the homebuilding industry tomorrow that includes loans that will cost less than the going market rate.

Cyrela, Brazil's biggest builder, surged 34 percent to 10.35 reais. The shares have tumbled 57 percent this year as economic growth slowed, interest rates rose and credit tightened. Gafisa rose 30 percent to 13.99 reais.

Commodity Producers Gain

Cia. Vale do Rio Doce, the world's largest producer of iron ore used to make steel, jumped 13 percent to 22.95 reais. The UBS Bloomberg CMCI Index of 26 raw materials rose 0.6 percent. Copper, nickel, aluminum and tin all gained.

Petroleo Brasileiro SA, the state-controlled oil company, rose 11 percent to 20.05 reais.

Cosan jumped 23 percent to 10.50 reais, the most since at least November 2005.

``Sugar prices have remained flat over the last decade and were not inflated like several other commodities,'' wrote the Bradesco analysts. ``Sugar fundamentals -- which have been very negative for the last three years -- have turned around recently and should become positive in the coming years.''

The real rose for a second day, gaining 4.2 percent against the dollar. The BM&FBovespa MidLarge Cap index rose 12 percent, while the BM&FBovespa Small Cap index climbed 10 percent.

Mexico's Bolsa index rose for the first time in six days, led by retailer Wal-Mart de Mexico SAB, which gained on speculation it will weather the economic slowdown better than competitors.

Walmex, as the country's largest retailer is known, advanced the most since October 1997 on bets it will maintain sales and profits as Mexico's economy slows, said Jorge Lagunas, portfolio manager at Grupo Financiero Interacciones in Mexico City.

Walmex rose 14 percent to 33.99 pesos.

Elsewhere in Latin America, Chile's Ipsa rose 1.8 percent, Argentina's Merval gained 6.6 percent, Colombia's IGBC gained 3 percent and Peru's Lima General Index gained 0.3 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net