Most Brazil Stocks Gain on Rate Cuts, Pulp Mergers; Bolsa Drops

By Paulo Winterstein

Dec. 4 (Bloomberg) -- Most Brazilian stocks rose after central banks around the world lowered interest rates to boost economic growth and speculation grew that the country’s biggest pulp producers may revive plans to merge.

Brazil’s Bovespa Index dropped in the last 10 minutes of trading, following a plunge in U.S. shares as oil tumbled to the lowest since January 2005. Gains for pulp producers Aracruz Celulose SA and Votorantim Celulose & Papel SA overshadowed the retreat for raw-material producers Petroleo Brasileiros SA and Cia. Vale do Rio Doce. Brasil Telecom SA led the rally for phone stocks as investors sold commodity producers and bought companies that offer stable returns and are less reliant on global growth.

“This is a clear positive for the companies and for the country as it will be the most important pulp company in the world,” said Greg Lesko, who helps oversee $750 million at Deltec Asset Management Corp. in New York, of Aracruz and VCP negotiations. Europe’s “central bank has been behind the curve and is now just getting in line to where it ought to be. It’s the right thing to do.”

The Bovespa fell 168.93 points, or 0.5 percent, to 35,127.77. Thirty-nine stocks rose while 27 fell. The BM&FBovespa Small Cap index added 1 percent, while the BM&FBovespa MidLarge Cap index dropped 1 percent. Mexico’s Bolsa fell 1.2 percent, and Chile’s Ipsa was little changed.

Pulp Producer Merger

Grupo Votorantim, Brazil’s largest industrial group and controller of VCP, may make a new offer for a 28 percent stake in Aracruz, Valor said, citing an executive close to Arapar SA, the company that owns the stake. Votorantim agreed to buy the stake from Arapar SA for 2.71 billion reais ($1.08 billion) in August, a month before Aracruz announced that currency bets led to a 2.13 billion-real loss, the Sao Paulo-based newspaper said.

Aracruz rose 3.9 percent to 1.86 reais. VCP added 4.8 percent to 13.21 reais.

Vale slid 2.2 percent to 21.96 reais after announcing it will cut nickel output and suspend some operations in Canada because of falling metals demand. Citigroup Inc. cut its 2009 profit estimate for Vale on the prospect of lower volume growth.

“It’s a reaction to the reality of what going on,” Lesko said in a phone interview. “First we were talking cuts in pricing, now it’s volumes too. The company adjusted to the reality, and that’s what you want them to do. It’s not a positive catalyst, but it shows the company is on top of things.”

Oil Slump

Petrobras dropped 3.7 percent to 18.60 reais. Vale and Petrobras together account for 30 percent of the index.

Crude oil fell 6.7 percent to $43.67 a barrel, the lowest settlement price since January 2005, on the deepening global recession. Prices may dip below $25 a barrel next year if the recession spreads to China, Merrill Lynch & Co. said in a report.

Brazilian banks gained after the European Central bank cut interest rates by three quarters of a percentage point to contain the fallout from the financial crisis. Central banks in England, Sweden and Indonesia also lowered borrowing costs.

Uniao de Bancos Brasileiros SA advanced 1.8 percent to 14.96 reais. Banco Itau Holding Financeira SA, which agreed to buy Unibanco to form Latin America’s biggest financial group, rose 0.9 percent to 27.37. Banco do Brasil SA, the biggest state-controlled bank, rose 2.1 percent to 14.60 reais.

Raymond James & Associates Latin America economist Mauricio Rosal said today Brazil’s central bank may lower the benchmark lending rate a half percentage point to 13.25 percent next year. The next rate-setting policy meeting is scheduled for Dec. 9-10.

Brasil Telecom surged 8.9 percent to 15.60 reais

“When commodities prices fall, as we see today, phone carriers’ shares become more attractive,” said Alex Pardellas, an analyst at Banif Investment Banking in Sao Paulo.

Poultry Exports

Sadia SA, Brazil’s second-largest food company, jumped 3.2 percent to 3.25 reais. Marfrig Frigorificos e Comercio de Alimentos SA, a beef and poultry exporter, added 7.4 percent to 7.41 reais. The companies may be the biggest beneficiaries of China reopening its market to Brazilian poultry exports, announced yesterday, Santander analyst Alexander Robarts wrote.

Mexican stocks dropped for the first time in three days as steel-mill operator Grupo Simec SAB and mining company Grupo Mexico SAB slumped more than 3 percent. Copper prices fell.

Grupo Aeroportuario del Sureste SAB, Mexico’s second- biggest airport company, fell for the first time in three days after saying passenger traffic rose 3.1 percent in November, lower than an estimate for 3.3 percent growth by brokerage Actinver SA. Asur, as the company is known, dropped 3.2 percent to 36.61 pesos.

Chile Stocks

Chile’s Ipsa index was little changed as Cia. Cervecerias Unidas SA gained and banks fell.

Chile’s largest brewer agreed to buy a 25 percent stake in Vina Tarapaca SA, the wine maker controlled by Cia. Chilena de Fosforos SA, for $33.1 million, the brewer said in a regulatory filing. The deal would form Chile’s second-biggest wine exporter, Estrategia newspaper reported.

Chilean lenders fell after Morgan Stanley said 2009 will be a difficult year for banks in the country. “The combination of declining lending volumes, falling intermediation margins, and higher credit losses should prove very challenging for earnings and return on equity,” Morgan Stanley analyst Jorge Kuri wrote in a note to clients.

Argentina’s Merval added 2.8 percent, Colombia’s IGBC rose 0.6 percent and Peru’s Lima General index dropped 0.9 percent.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net