Brazil markets extend rally as banks raise cash
Posted by click at 9:47 PM
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brazil
Reuters, 04.04.03, 4:46 PM ET
By Todd Benson
SAO PAULO, Brazil, April 4 (Reuters) - Brazil's financial markets ended stronger on Friday, capping a week-long rally as local banks issued debt abroad amid signs that the economy is withstanding the fallout from the war in Iraq, traders said.
The country's currency, the real , gained ground against the dollar for the sixth straight session, posting its best close since Sept. 16. The real firmed 1.1 percent to 3.22 per dollar, marking a 4.4 percent gain for the week and a 10 percent advance so far in 2003.
Stocks followed the currency higher, though gains were tempered by some light profit-taking ahead of the weekend as war-wary investors watched while U.S.-led troops prepared an assault on the Iraqi capital of Baghdad.
After spending much of the day seesawing in and out of the red, the Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index settled 0.49 percent higher at 12,065.5 points, capping a 5.9 percent gain for the week.
The gains came after Brazil's top private bank Bradesco <BBDC4.SA> said it had issued $250 million in 14-month bonds and offered 50 million euros in eight-month notes, becoming the latest in a rash of local companies to raise cash abroad.
On Thursday, the Banco Real unit of Dutch bank ABN AMRO <AAH.AS> (nyse: ABN - news - people) added another $100 million to its nine-month bond, bringing the total issue to $250 million.
"What's so remarkable is that things just seem to get better here at a time when the world is worried about war and the U.S. economy is struggling," said Alvaro Bandeira, chief economist at AgoraSenior investment firm in Rio de Janeiro.
"Credit is flowing back into the country, and the markets are reacting accordingly."
Brazil's markets have staged an impressive rally over the past month as hopes mount that the new government of President Luiz Inacio Lula da Silva will manage to push through tough economic reforms seen as key to the country's fiscal health, like overhauling the costly tax and public pension regimes.
But now that the real is trading at near seven-month highs, investors are speculating that the Central Bank may intervene to keep the exchange rate at a favorable level for exports. The bank's president, Henrique Meirelles, denied that possibility on Friday, saying the monetary authority would only intervene in the market "to solve liquidity problems."
In the stock market, losers outpaced winners by a ratio of 27 to 24, while three shares settled unchanged. Volume was average, totaling 690.1 million reais ($214.3 million).
Banking shares finished atop the leader's board. Bradesco <BBDC4.SA> (nyse: BBD - news - people) shares rose 3.48 percent to 11.90 reais on news of the bond issue, while stock in its main competitor, Banco Itau <ITAU4.SA>, surged 4.64 percent to 190.44 reais.
The energy sector, which is heavily indebted in dollars, continued to climb in tandem with the real and on hopes of government support for the struggling companies.
Federal holding Eletrobras <ELET6.SA> rose 1.67 percent to 24.40 reais, adding on to 7 percent jump on Thursday, while Minas Gerais state distributor Cemig <CMIG4.SA> shot up 2.43 percent to 29.50 reais.