Brazil shares leap as investors cheer rate cut
Reuters, 06/21/2000 18:41
By Katherine Baldwin
SAO PAULO, June 21 (Reuters) - Brazil's benchmark index surged to its highest level in over two months on Wednesday as investors bet the Central Bank's decision to cut interest rates would spur growth and company profits, traders said.
The Bovespa (INDEX:$BVSP.X) index gained 2.4 percent to 17,254, the highest since it closed at 17,514 on April 7.
Brazil's Central Bank on Tuesday knocked down the key lending rate to 17.5 percent from 18.5 percent a year, betting on declining inflation. Lower interest rates could help detonate a surge in economic and corporate growth.
"The market was surprised by the Central Bank's decision yesterday to lower rates," said Bruno Seraphim, a trader at UBS/Warburg Dillon Read in Rio de Janeiro. "Brazil's seen positive money flows for a few days, but this helped to accelerate the flow of capital and encouraged local investors."
Some telecommunications companies, including Telemar (SAO:TNLP4) and long-distance carrier Embratel (SAO:EBTP4) shot up. Bank shares gained on optimism the rate cut would spur demand for credit, analysts said. Bradesco (SAO:BBDC4) rose 2.8 percent to 14.80 reais.
The index has racked up a 15.4 percent this month and is now in positive territory for the year, with a gain of 1 percent. Turnover soared to 1.3 billion reais ($706 million). That compares to a daily average of 666 million reais in May.
Hotly traded telecommunications shares posted healthy gains virtually across the board. But Telesp (SAO:TLPP4) and Tele Sudeste Celular (NYSE:TSD)(SAO:TSEP4), two companies controlled by Spanish telecom group Telefonica (MADRID:TEF) were out of step.
Telesp slumped 3.9 percent to 43.89 reais and Tele Sudeste sank 4.4 percent to 14.70 reais. The slide came on the back of a 4.7 percent decline in Telefonica shares traded in Madrid and as local investors scurried to sell stocks before Telefonica's stock swap offer expires, analysts said.
Telefonica wants shareholders of its local units to swap their stock for shares in the parent company, which will then be listed on the Brazilian index in the form of Brazilian Depositary Receipts.
The swap offer expires at the end of the month, but Friday is the last day for shareholders to take advantage of the offer since otherwise they will not have enough time to complete the transaction, Seraphim said.
Telesp and Tele Sudeste's slide helped push up other telecommunications shares as investors migrated. Telemar rallied 4.7 percent to 42.49 reais. Tele Norte Celular (SAO:TNCP4) gained 9.7 percent to 1.92 reais.
Investors rushed to get a slice of Brazil's rising equity market ahead of a national holiday Thursday when markets will be closed. katherine.baldwin@reuters.com))
Copyright 2000, Reuters News Service |
