By Carla Mozee
Brazilian stocks dropped the most in more than two months
Wednesday, pacing declines in Latin American equity markets, after
investors were spooked by China's plan to pull back on bank lending
to cool its fast-growing economy.
Brazil's Bovespa fell 2.4% to 68,200, its worst finish since
Nov. 12 when the index lost 3%.
In Mexico City, the IPC equity index fell 1.4% to 32,025.34 as
consumer discretionary, retail and finance stocks were unable to
cling to previous gains. Argentina's Merval lost 1.4% while Chile's
IPSA managed to pare deeper losses for a decline of 1 point to end
at 3,813.93.
In Sao Paulo, just six of the 63 stocks in the Bovespa index
finished in positive territory, with Brasil Foods (BRFS) turning
around earlier losses for a gain of 2.6%. The worst price performer
on Wednesday was online retailer B2W Companhia Global do Varejo as
its shares dropped 6.2%.
Among volume leaders, preferred shares of Vale (RIO) fell 1.8%
as prices for metals slumped. Vale is the world's largest provider
of iron ore, a component used in the production of steel. China is
Vale's top exporting market. Meanwhile, shares of Brazilian steel
maker Gerdau (GGB) fell 3.5% and CSN (SID) shares fell 2.4%.
Shares of oil giant Petrobras (PBR) fell 2.6%, their sharpest
decline in a month, as oil prices fell 1.8% to below $78 a barrel
on the New York Mercantile Exchange.
China last year became Brazil's top trading partner. The world's
largest emerging market has tapped Brazilian exporters for key
natural resources as part of its efforts to shield its economy from
the worst of the worldwide financial crisis.
On Wednesday, the China Banking Regulatory Commission asked
several commercial banks to stop issuing new loans for the rest of
January, the state-run China Securities Journal reported, citing
several sources. China's top banking regulator, Liu Mingkang,
denied the report, but said Chinese banks were expected to issue
few loans this year than last year.
A ramp-up in lending to banks in China has been a central
element in China's stimulus program.
The report follows several tightening measures by the Chinese
government earlier this month.
Chris Palmer, head of global emerging markets for Gartmore in
London, told MarketWatch on Wednesday that China is trying to scale
back new projects in its provinces.
"The pace will be slower, but the real economic benefit and
actual activity is nowhere close to peaking," he said. Palmer also
said he expects there will be "relatively little change" in real
demand for commodities or energy, "which are the two areas people
seem to be nervous today."
Prices for gold and oil remained lower after reports showed that
housing starts in the U.S. fell 4% in December while producer
prices rose 0.2%.
On Wall Street, the S&P 500 Index (SPX) fell l.1% and the
Dow Jones Industrial Average (DJI) stumbled 122 points, or 1.1%, to
10,603.
Separately, the head of Brazil's central bank, Henrique
Meirelles, said Wednesday that he expects "solid recovery" in Latin
America's largest economy, with growth driven by investment. The
central bank expects gross domestic product to rise 5.8% in
2010.
GDP expanded 0.2% last year. Foreign direct investment is
projected to climb to $45 billion next year, from $26 billion in
2009.