Bovespa Index Declines to Lowest Figure in 8 Months

As the economists reduced forecasts for growth in Brazil’s manufacturing industry, benchmark gauge of it, Bovespa Index declined to a figure that’s the lowest in last 8 months. The gauge experienced a decline of 0.9% and is currently at 54,583.65. This is going to become the lowest close since 26th July. Around 66% of the total companies registered, experienced decline on today. According to a Central Bank survey done by economists, industrial production in Brazil will increase by 3% in 2013, whereas, the estimate was of 3.12%, just a week earlier.

According to an analyst of Futura Corretora, Luis Gustavo Pereira, Brazilian economy has to deal with the rising inflation, at the same time, the economic activity of the country is taking longer than expected to recover completely. To make matters worse, the companies are expected to post weak earnings as well. This will rekindle the concern that the recovery process of Brazil’s economy is going to falter.

Analyst of JPMorgan, Alan Alanis stated that this is a good time for the investors with a time horizon of 6 to 12 months for taking a deeper look at the meat sector of Brazil, because the valuations really look attractive at this point of time. Incidentally, the largest beef producer in the world, JBS SA has increased by 4.2% and each of its shares is currently priced at 6.68 Reais now. This marks the best closing for the company in last 3 weeks. JPMorgan Chase has already raised its stock recommendation to the equivalent of buy.

On 3rd January, the Bovespa Index experienced its highest figure of this year and since then, it has retreated by 14%. Concerns are currently accelerating that the economic recovery of Brazil will be curbed. Apart from that, many feel that the interventionist policies of the Brazilian Government will be hurting profits in industries such as energy and utility.

Among other companies, MRV Engenharia & Participacoes SA led the losses for companies which sell in the local Brazilian market. The oil producer controlled by the billionaire, Eike Batista, OGX Petroleo & Gas Participacoes SA extended the 5-day decline to 32%. After announcing that a private equity firm General Atlantic LLC has decided to invest in the initial public offering of the mileage unit of Gol Linhas Aereas Inteligentes SA, the shares of the same went ahead.