Brazil Stocks Rally Most in Month on Commodities; Bolsa Gains

By Alexander Ragir and William Freebairn

Nov. 24 (Bloomberg) -- Brazilian stocks rallied the most in a month, led by banks and commodity producers, after the U.S. government rescue of Citigroup Inc. reassured investors about the stability of the financial system and raw-material prices gained.

Uniao de Bancos Brasileiros SA and Banco Itau Holding Financeira SA surged more than 15 percent as JPMorgan Chase & Co. said the financial crisis worldwide may spur more consolidation. Petroleo Brasileiro SA jumped the most in a year after Goldman Sachs Group Inc. said the oil company may generate enough cash to develop the pre-salt region. Cia. Vale do Rio Doce led the rally in metal producers with a 13 percent advance.

“I would describe it as some hope when last week the market looked kind of hopeless,” said Jacopo Valentino, who oversees $4 billion as head of Latin American equity at BNP Paribas Asset Management in Sao Paulo. The Citigroup intervention “is even more positive outside the U.S. because there is no financial crisis here. The market was falling, mimicking the U.S. more that anything else, so once you take pressure off the U.S., you start looking at your own market.”

The Bovespa rose for the first time in six days, adding 9.4 percent to 34,188.83. It posted the biggest gain since Oct. 28. The BM&FBovespa Small Cap index gained 4.9 percent. The BM&FBovespa MidLarge Cap index rose 10 percent. Mexico’s Bolsa climbed 7 percent. Chile’s Ipsa advanced 2.1 percent. MSCI Emerging Markets rose 3.8 percent.

Global stocks rallied after Citigroup, facing the threat of a breakup or sale, received $306 billion of U.S. government guarantees for troubled mortgages and toxic assets to stabilize the second-largest U.S. bank by assets.

Banks Rally

Itau, which bought Unibanco to become Latin America’s biggest bank, rose 16 percent to 23.60 reais. Unibanco jumped 18 percent to 13.20 reais. Large Brazilian banks may benefit from the global financial crisis “from sector consolidation, central bank liquidity and higher spreads,” wrote Ben Laidler, JPMorgan’s Latin American equity strategist.

Banco do Brasil SA rose 9.6 percent to 12.50 reais. The largest government-controlled lender bought Sao Paulo state-owned Banco Nossa Caixa SA on Nov. 20. Brazil’s biggest banks will step up efforts to buy smaller rivals after a sell-off in the country’s equity markets boosted their takeover clout, Raymond James & Associates said Nov. 21.

Vale surged 2.69 reais to 23.44 reias. Latin America’s biggest steelmaker Gerdau SA rose 9.3 percent to 12.29 reais.

Demand for industrial metals and energy may be boosted by plans for a second Chinese stimulus package, announced this weekend. The National Development and Reform Commission, the nation’s top economic planning agency, proposed tax cuts, salary increases and larger housing subsidies. China is the world’s second-biggest oil consumer after the U.S.

Petrobras Gains

Petrobras, as Brazil’s state-controlled oil company is known, jumped 14 percent to 19.23 reais. Investor concern that Petrobras will have trouble paying for the development of expensive deep-water oil fields is “overdone,” wrote Goldman analyst Arjun N. Murti in a note to clients.

The company found oil in an onshore well in Brazil’s Espiritu Santo Basin, the country’s petroleum regulator said on its Web site.

The Standard & Poor’s GSCI index of 24 commodities increased 6.9 percent today. Commodities account for two-thirds of Brazilian exports, according to the Brazilian Exporters Association in Rio de Janeiro. About half of the Bovespa is made up of raw-material producers.

All America Latina Logistica gained 16 percent to 9.95 reais. Latin America’s biggest railroad operator was rated “buy” in resumed coverage at Raymond James on the outlook for “strong” earnings growth from its 2006 acquisitions and from the company’s increasing productivity, Eduardo Puzziello wrote.

Latin Outlook

Latin American stocks may rally 30 percent in U.S. dollar terms during 2009, according to Deutsche Bank AG’s head of equity strategy in the region.

The worst of the U.S. recession “will be over” by then and global equity markets will have fallen too far, Guilherme Paiva wrote. Brazil’s Bovespa may end 2009 at 45,000, a 44 percent gain from last week’s close. Mexico’s Bolsa index may advance 31 percent to 24,000 and Chile’s Ipsa may gain 27 percent to 3,000.

Desarrolladora Homex SAB rose the most in Mexico’s Bolsa index after Citigroup Inc. and Deutsche Bank AG said it an and Urbi Desarrollos Urbanos SAB are better positioned than rival homebuilders to grow. Mexican housing demand will exceed supply in 2009, Deutsche Bank said, citing the president of Mexico’s National Housing Commission, Carlos Gutierrez Ruiz.

Homex, the country’s biggest homebuilder, climbed 28 percent 34.91 pesos, the biggest gain since trading began in 2004. Urbi, the third biggest builder, advanced 12 percent to 19.77 pesos. The Habita index of Mexican homebuilders gained 15 percent after falling 18 percent last week.

Chile’s Ipsa snapped a five-day losing streak as Banco Santander Chile rose 8.8 percent after JPMorgan Chase & Co. recommended buying Chilean banking stocks.

Argentina’s Merval index climbed 8.8 percent, its first gain in six sessions, Colombia’s IGBC advanced 3.2 percent and Peru’s Lima General index rose 2.6 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.