Brazil’s Bovespa stock index jumped to a record after Standard & Poor’s unexpectedly raised the country’s credit rating to investment grade.
Lojas Renner, Investment Property Brazil’s second-biggest retailer, climbed to the highest since 2005 as a growing economy spurred a 62 percent jump in profit. Usinas Siderurgicas de Minas Gerais SA led steelmakers higher after its first-quarter sales beat analysts’ estimates by 7.6 percent.
“People were not expecting the investment grade this soon, so it’s a positive surprise,” said Greg Lesko, head of equity at Deltec Asset Management in New York, which manages $1 billion in assets. “As far as long term prospects for this market, this confirms people’s positive view on Brazil.”
The Bovespa Index of the most-traded stocks on the Sao Paul exchange surged 5.7 percent to 67,453.43 at 3:32 p.m. New York time, the biggest gain in three months.
Brazil’s rating was lifted to BBB-, Standard & Poor’s lowest investment grade rating, the rating company said today.
S&P cited the country’s “continuity” in maintaining its inflation targeting policy and government debt levels “increasingly in line” with investment grade countries.
Brazil became a net foreign creditor for the first time this year, inflation dropped to a seven-month low in February and the benchmark interest rate was at a record low 11.25 percent before this month’s increase. The country’s economy probably grew at a 4.8 percent rate last year, the fastest since 2004, according to the median economist estimate in a Bloomberg survey.
Lojas Renner had the biggest gain in the Bovespa, rising 11 percent to 38.30 reais. First-quarter earnings before interest, taxes, depreciation and amortization rose 43 percent to 55.4 million reais ($32.5 million), beating the average estimate of 52.5 million reais from a Bloomberg survey.
Retailers Rally
The “above forecast” earnings are a positive signal for Brazil’s retailers, which probably had “strong sales” in the first quarter, UBS AG analyst Jander Medeiros wrote today in a note to clients. B2W Cia. Global do Varejo, the biggest online retailer, gained 8.3 percent to 54 reais.
Retailers have benefited from surging sales this year, spurred by low interest rates and strong economic growth.
Investment Property Usiminas paced gains for metals stocks, rising 7.4 percent to 79.01 reais. The second-largest steelmaker’s net sales in the quarter advanced 7 percent to 3.55 billion reais, higher than the 3.3 billion reais average of estimates compiled by Bloomberg.
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