Brazilian ADRs Plunge; Telebras Lowest Since May 1996
Dow Jones Newswires
NEW YORK -- American depositary receipts of Brazilian companies were
tanking Friday afternoon, when investors' bearishness towards the country was
exacerbated by a half-hour trading suspension in the Sao Paulo stock
exchange, traders said.
Brazilian ADRs showed double-digit percentage losses across the board, amid
heavy volumes exchanged.
Bellwether Telebras hit levels not seen since May 1996. At 1940 GMT, the
ADR was recovering from its intraday low of $57, down 9.5% at $58 5/8.
Traders added that the prevalent negative sentiment was compounded by
Moody's Investors' Service placement Friday of 11 Brazilian banks under
review for a possible downgrade. Thursday Moody's also downgraded Brazil's
foreign-currency denominated debt.
Unibanco closed down 14% at $11 1/2 after trading more than 2 million
ADRs.
The worst loser Friday was retailer Pao de Acucar, which closed down 21%
at $9 9/16, a new 52-week low. The stock has roughly lost two thirds of its
52-week high of $27.
Traders said that Brazilian ADRs are coming under more strain than other
Latin American issues because of continuing speculation about a devaluation of
its currency, the real.
"People think Brazil is the next country that could devalue, and that's where the
U.S. money centers and large banks have all the exposure," a dealer said. "So
they're just hammering it." He added that money center banks don't want a
repeat of the losses they incurred in Russia after its recent devaluation and
default.
"They don't want to be caught like they were with Russia, although there's no
doubt they're overreacting."
Another factor, dealers said, was the absence of potential buyers and the
upcoming long weekend both in Brazil and the U.S.
"The problem is that nobody is around. There are no buyers, the trading rooms
are empty," the trader said. "People (would) rather be flat going into the
weekend than long."
-By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com |
