By Carla Mozee
Brazilian stocks closed higher Friday after a see-saw session
during which investors continued to bet that next week's central
bank meeting will result in the country's first interest-rate hike
in more than a year.
Brazil's Bovespa index rose 0.2% to 69,509.49 after spending the
session oscillating between advances and declines. The index edged
up 0.1% for the week, which was shortened by a holiday.
Shares of interest-rate sensitive finance and real estate firms
struggled with losses throughout the day. Shares of PDG Realty
(PDGRY) fell 1.6% and Rossi Residencial (RSRZY) slipped 0.5%.
Privately run banking firm Itau Unibanco (ITUB), however, shook off
losses and rose 0.1% and rival Banco Bradesco (BBD) lost 0.7%.
Ahead of next week's central bank meeting, a report showed that
consumer prices rose 0.76% this month through April 22, according
to the Getulio Vargas Foundation, whose March index reading showed
consumer prices rose 0.8%.
Yields on Brazilian interest-rate future contracts rose
following the report as the results were in line with other data
showing rises in inflationary pressures.
Strategists have been raising expectations that the first
rate-tightening cycle since March 2008 to September 2008 will start
next week as policy makers work to stave off inflation and moderate
the accelerating pace of economic activity. Policy makers started
easing the key Selic rate in January 2009.
"We agree that the risks the economy is overheating are higher
today than they were at the end of [the first quarter of 2010],"
wrote economist Marcelo Salomon at Barclays Capital Research on
Friday in a note outlining the broker's revision of its view on
Brazil's monetary-policy tightening cycle. The broker now expects
four rate hikes between April and September for a total of 300
basis points.
The Selic was cut in July 2009 to 8.75%, a historical low. The
latest rate decision will be released on Wednesday.
The recovery process still has more space to run before hitting
"the same stressed demand conditions as in the beginning of the
previous tightening cycle," wrote Salomon. "We are not yet at the
same place we were two years ago, but the odds that we are moving
in that direction faster than we had expected are rising."
On the foreign-exchange market, Brazil's gained ground, finding
support after Greece formally requested financial help from the
International Monetary Fund and the European Union. The real traded
at 1.757 per dollar compared with Thursday's level at 1.765.
Greece's debt woes have prompted some investors throughout the
year to step back from assets they perceive as risky, such as those
from emerging markets.
Elsewhere in Sao Paulo's equity market, shares of Telesp (TSP)
fell 1.2% after J.P. Morgan downgraded the company's rating on the
fixed-line operator to underweight, citing in part the stock's
"unattractive valuation." Analyst Andre Baggio in a note to clients
wrote that with an 11.6% free cash-flow yield, Telesp trades in
line with its European peers "which have lower cost of
capital."
The yield is only slightly better than that of Mexican wireless
giant America Movil (AMX) and Brazilian mobile services provider
Vivo (VIV), "which have a much better growth outlook," he wrote,
adding that Telesp is facing more intense competition from mobile
and cable companies as well as telecom operator GVT Holding.
Vivo shares fell 1.3%, and America Movil's shares traded in
Mexico City rose 0.5%.
Mexico's IPC equity index rose 0.6% to record a fresh record
close at 33,853.69, fronted by a 9.1% jump in shares of Cemex (CX).
The cement maker counts the U.S. as a key market, and investors in
the U.S. housing sector received an upbeat report that new-home
sales leapt 27% in March, the largest percentage gain since April
1963.
Home buyers sought to close deals ahead of an April 30 deadline
to qualify for a federal tax credit.
The IPC index closed the week with a 0.7% gain.
Argentina's Merval rose 0.7% to 2,475.13 and ended with a 1.9%
week advance.
Chile's IPSA rose 2 points Friday to end at 3,836.02, and edged
up 0.1% for the week.
Chile to tap international capital markets
On Friday, Chile's finance minister announced plans for the
government to sell $1 billion in 10-year dollar-denominated bonds,
and $500 million in 10-year peso-denominated bonds as part of the
country's effort to raise funds to pay for reconstruction efforts
after a massive Feb. 27 earthquake.
Chile hasn't issued global bonds since 2004. Finance Minister
Felipe Larrain, who outlined the plan for debt sales in New York,
reportedly said the country is also committed to regularly
participating in the international capital markets.
The government has estimated that the earthquake created up to
$30 billion in damages, and that the public-sector's tab will come
in at $8.4 billion. Last week, Chile announced plans to raise
certain taxes as part of its fund-raising efforts.
In action among exchange-traded funds Friday, the iShares MSCI
Chile Investable Index fund (ECH) rose 0.2% to 55.96.