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Brazil Stocks Jump on Outlook for Iron Ore Prices; CSN Surges
By resourceINTEL · March 9, 2010 · 11:32 pm · Leave a Comment
March 9 (Bloomberg) — Brazilian stocks rallied to the highest since January after Banco Bradesco SA said iron ore prices may almost double this year and homebuilders rallied on the outlook for higher sales.
Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, rose the most in three months after its chief executive officer estimated its mining spinoff may be worth $20 billion. PDG Realty SA Empreendimentos & Participacoes gained as Goldman Sachs Group Inc. said shares will benefit from the announcement of a government housing program. Vale SA and Usinas Siderurgicas de Minas Gerais SA surged after Bradesco estimated ore prices may increase 96 percent in 2010.
“I think this has a lot to do with the expectation of a huge increases in the price of iron ore,” said Saulo Sabba, who oversees the equivalent of $245 million at Maxima Asset Management in Rio de Janeiro. “It looks like foreigners are buying because all the big stocks are up.”
The Bovespa index jumped 1.5 percent to 69,576.38, the highest level since Jan. 19. Fifty-two stocks gained on the index while nine fell. The Bovespa Small Cap index climbed 0.8 percent to 1,178.46. The real rose 0.7 percent to 1.7757 per U.S. dollar.
Bradesco analyst Raphael Biderman wrote in a note to clients today that iron ore prices may surge because of the 140 percent rise in so-called spot prices and as several mining expansions this year and next have been postponed. Itau Unibanco Holding SA analyst Marcos Assumpcao wrote in a report yesterday that ore prices will jump 70 percent this year. Bradesco and Itau are Brazil’s biggest non-state banks.
‘Makes Sense’
Vale, the world’s biggest producer of the metal used to make steel, rose 1 percent to 47.67 reais. Usiminas, the steelmaker that also mines ore, jumped 3.5 percent. Iron ore company MMX Mineracao e Metalicos SA gained 1.9 percent.
Itau’s Assumpcao wrote in yesterday’s report that CSN’s mining assets are worth $22.4 billion. An estimated value of about $20 billion for the mining unit “makes sense,” Chief Executive Officer Benjamin Steinbruch told reporters in Sao Paulo today.
CSN rose 3.9 percent to 66.41 reais.
The estimate for CSN’s spinoff signals investors may be undervaluing the company’s steel assets, said Greg Lesko, who helps manage $750 million at Deltec Asset Management in New York. CSN also expects domestic sales of the metal to increase 30 percent this year, commercial director Luis Fernando Martinez said.
PDG Realty
“If that estimate was just of iron ore, then it’s not valuing its steel assets very much and that’s probably what’s buoying the stock,” Lesko said.
PDG Realty rose 2.5 percent to 16.30.
“Strong launches and contracted sales, a rising number of units titled, and a faster cash conversion cycle than most of its large-cap peers should be the main drivers of stock performance,” wrote Goldman Sachs analyst Leonardo Zambolin in a note to clients. The shares could also benefit when the government announces whether its housing program will be continued, he said.
Tam SA and Gol Linhas Aereas Inteligentes SA rallied after the airlines were granted additional slots at Brazil’s busiest airport. Tam rose 0.6 percent, while Gol climbed 2.2 percent.
Brazil’s civil aviation agency, known as Anac, gave Tam 54 new landing and take-off slots at Sao Paulo’s Congonhas airport, the nation’s busiest, while Gol was granted 56 additional slots at the same airport.
The Bovespa is up 1.4 percent this year. The measure soared 83 percent in 2009, its best performance since 2003, as domestic demand, government stimulus plans and rising prices for Brazil’s commodity exports helped pull the economy out of recession faster than most countries. The real surged 33 percent in 2009, the best performance among 26 emerging-market currencies tracked by Bloomberg. The currency has dropped 1.8 percent this year…read more at the Bloomberg
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