Bovespa Drops The Most in a Month as Brazil Retailers, Builders Decline

The Bovespa stock index declined the most in a month, led by retailers and homebuilders, as foreign investors held back from pouring new cash into the Brazilian market after six straight days of gains.

Cia. Brasileira de Distribuicao Grupo Pao de Acucar fell on concern shareholder Casino Guichard-Perrachon SA won’t relinquish control amid a disputed proposal to merge the Brazilian retailer with Carrefour SA’s local unit. Rossi Residencial SA led real-estate shares lower after Bank of America Corp. cut the sector to “equalweight” on rate concern.

The Bovespa fell 1.3 percent to 63,038.81 at the 4:15 p.m. New York time close, halting a six-day advance. It was the measure’s biggest decline since June 6. Fifty-six stocks dropped on the index, while eight climbed. The real weakened 0.7 percent to 1.5648 per dollar.

“There’s space for profit-taking after a good rally,” said Alvaro Bandeira, director of Rio de Janeiro-based brokerage Ativa Corretora. “The market is still indefinite. It’s going to need foreign money.”

Investors pulled 1.38 billion reais ($882 million) from Latin America’s largest equity market in the year through June 27, according to the exchange.

Brazil’s benchmark equity gauge extended losses after Portugal’s long-term government bond ratings were cut to Ba2, or junk, from Baa1 by Moody’s Investors Service.

Portugal is the second euro country rated non-investment grade by Moody’s, joining Greece, after winning a 78 billion- euro ($113 billion) international bailout in May as the Iberian nation struggles to repair its finances. Concern that Portugal won’t be able to fully achieve its deficit-reduction target was one of the reasons for the cut, Moody’s said in a statement.
Pao de Acucar

Pao de Acucar fell 1.9 percent to 70.70 reais. Casino Guichard-Perrachon SA Chief Executive Officer Jean-Charles Naouri told Luciano Coutinho, president of Brazil’s state development bank, known as BNDES, that the company will seek to keep a controlling stake in Brazil’s largest retailer, O Estado de S. Paulo reported, citing an unidentified Casino official.

Valor Economico separately reported, without saying where it obtained the information, that Casino wants to accelerate a shareholder agreement that would give it control of Pao de Acucar in 2012.

Rossi, Brazil’s sixth-biggest homebuilder by revenue, lost 4.6 percent to 12.56 reais as the BM&FBovespa Real Estate (IMOBBV) Index slid 1.7 percent.

“Confidence on the end of Brazil’s monetary tightening cycle by July has diminished” following the central bank’s “hawkish” second-quarter inflation report, analysts at Bank of America, including Renato Onishi, wrote in a note to clients today. They cut homebuilders from “overweight.”
Tam Advances

Losses were partially offset as airline Tam SA advanced 4.6 percent to 36.46 reais on speculation Chile’s antitrust tribunal will approve its takeover by Lan Airlines SA.

Azul Linhas Aereas Brasileiras, a Brazilian airline created by JetBlue Airways Corp. founder David Neeleman, hired banks to hold an IPO, two people familiar with the situation said yesterday, asking not to be named because they’re not authorized to speak publicly about the transaction. Giafranco Beting, the company’s director of communication and branding, declined to comment.

The index yesterday posted the longest winning streak since April as traders pared bets for higher borrowing costs in Brazil and equities rallied worldwide amid optimism on Greece’s debt crisis.

The Bovespa lost 12 percent from a November high through yesterday. The index trades at 10.2 times analysts’ earnings estimates, near the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 11.2 for MSCI Inc.’s gauge of 21 developing nations’ equities.