(Bloomberg) -- The Bovespa stock index climbed to the highest level in 21 months and the real strengthened after Brazil’s industrial production grew more than estimated and manufacturing in China expanded at a faster pace in March.
Gerdau SA gained 3 percent, leading steelmakers higher, after industrial output expanded at the quickest rate in four months. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, rose for a second day as crude prices climbed. Duratex SA increased 1.7 percent after Deutsche Bank AG recommended buying the maker of panels for the furniture industry.
The Bovespa index rose 1.1 percent to 71,156.15 at 1:23 p.m. New York time, climbing for a fifth day and erasing a drop of as much as 11 percent from a 19-month high on Jan. 6. Forty- two stocks gained on the index while 16 fell. The real strengthened 0.9 percent to 1.7660 per dollar.
“We’re basically seeing industrial activity rising in all countries, and not only rising but intensifying,” said Alvaro Bandeira, director of Rio de Janeiro-based Agora Corretora, Brazil’s second-biggest brokerage. “We’re seeing an acceleration of activity, which increases investors’ propensity for risk-taking a little bit more.”
The Bovespa has climbed 3.8 percent this year on signs the global economic recovery is gaining strength. 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 has dropped 1.2 percent this year after surging 33 percent in 2009, the best performance among 26 emerging-market currencies tracked by Bloomberg.
Real’s Rise
The rebound in economic activity and commodity prices may push the real back to last year’s high of 1.70 per dollar by July, said Ryan Gibbons, a partner at GPS Capital Markets, a Salt Lake City-based foreign exchange advisor to mid-size companies.
“If we see a normal operating environment with no major crisis, the currency will make a nice run again,” he said in a telephone interview.
Brazil’s industrial output increased 1.5 percent in February from January, beating the median estimate of a 1 percent advance by 30 analysts in a Bloomberg survey, and more than a revised 1.2 percent gain in January. Production rose 18.4 percent from a year earlier.
Gerdau, Latin America’s biggest steelmaker, rose 88 centavos to 29.78 reais. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest maker of the metal, rose 3 percent to 62.72 reais, while third-biggest Cia. Siderurgica Nacional SA added 2.3 percent to 36.49 reais.
Manufacturing Rebound
Japan’s largest manufacturers became the least pessimistic about the economy since 2008 as a global rebound drove demand for exports. The Tankan index of sentiment rose to minus 14 in March from minus 25 in December, the fourth straight gain, the Bank of Japan said in Tokyo today.
Commodity Rally
Vale SA, which gets about two thirds of its sales from Asia, rose 0.6 percent to 49.86 reais. Petrobras climbed 1.1 percent to 35.76 reais. Crude oil surged to a 17-month high on signs that global economic growth is accelerating, bolstering optimism that fuel consumption will increase this year. The Bloomberg Base Metals 3-Month Price Commodity Index increased 0.8 percent.
Duratex added 26 centavos to 15.61 reais. Wood panel prices will likely increase on growing demand and “relatively tight” supply, Josh Milberg, an analyst at Deutsche Bank, wrote in a note. He raised the Sao Paulo-based company to “buy” from “hold.”
Index Changes
PDG Realty SA Empreendimentos e Participacoes led gains on the Bovespa index after exchange owner BM&FBovespa SA said the real estate developer may have its weighting in the measure increased.
Brasil Ecodiesel Industria e Comercio de Biocombustiveis e Oleos Vegetais SA and Agre Empreendimentos Imobiliarios SA, which BM&FBovespa SA said may be added to the index next month, helped lead gains on the IBrX index of the 97 most-traded stocks in Brazil, jumping more than 2 percent each.
The Bovespa trades for 13.8 times analysts’ 2010 earnings estimates, compared with 15.9 times for Mexico’s Bolsa and 17.5 times for Chile’s Ipsa. The IGBC Index in Colombia is valued at 21.5 times profit estimates, Bloomberg data show. The Bovespa index trades for 17.8 times the reported profits of its companies after fetching 25.5 times in November, the most in almost six years, according to weekly data compiled by Bloomberg.
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