By Carla Mozee
Brazil's key equity index fell Friday, pulling back from a jump
in the previous session upon the start of a new interest-rate
tightening cycle in Latin America's largest economy.
Brazil's Bovespa fell 0.3% to 67,810, led by a nearly 2% decline
among the heavily weighted steel group. Shares of Gerdau (GGB) fell
1.1%, MMX Mineracao fell 2.4% and Usiminas declined 2%.
Shares of Brazil's Vale (RIO) fell 1.8% after the world's
largest iron ore miner said it will pay $2.5 billion in cash for a
51% stake in BSG Resources. The British mining company holds
iron-ore concessions in West African country of Guinea
The Bovespa's losses were limited, however, by gains among
retailers, home builders, communications and consumer discretionary
shares. Advancers were led by PDG Realty (PDGRY), up 4.3%, and
department store operator Lojas Renner , up 4.6%.
The Bovespa rose 2% in the previous session after Brazil's
central bank late Wednesday raised its key interest rate to 9.5%
from the historic low of 8.75%. The hike arrived amid concerns that
the economy is at risk of overheating and data showing a buildup in
inflationary pressures.
Frederick Searby, an equity strategist covering Latin America at
Deutsche Bank, recommended in a note Friday that clients stay long
in financials, staples and health care, "which fare well" in
tightening cycles.
"We also recommend in somewhat contrarian fashion telcos, due to
sector consolidation and outlier cheap valuations," he wrote.
The broker said its Brazil focus list includes Natura Cosmeticos
, dental benefits provider Odontoprev , card-payment processor
Cielo (CIOXY) and stock-exchange operator BM&F Bovespa .
The Bovespa is on track to finish the month with a loss of
nearly 4%. It's down more than 1% on a year-to-date basis.
Mexico's IPC lost grip of earlier gains Friday to fall 0.3%.
Chile's IPSA rose 0.3% and Argentina's Merval rose 0.2%.