3SOF

Here is a market that has been in a Bull Market !
The Brizilian Bovespa Stock Index, Symbol ($BVSP)

IBOVESPA SAO PAULO (Sao Paolo:^BVSP) Delayed quote data 

Index Value: 35,475.02
Trade Time: Jan 6
Change:  538.91 (1.54%)
Prev Close: 34,936.11
Open: 34,940.42
Day's Range: 34,940.42 - 35,529.45
52wk Range: 23,534.00 - 35,529.00

Headline News Link :  http://finance.yahoo.com/q/h?s=%5EBVSP

3 Year Chart......

Brazil's stocks and currency slip for 2nd day.......


SAO PAULO, May 23 (Reuters) - Brazil's stocks and currency slipped for a second day on Wednesday after former U.S. Federal Reserve Chairman Alan Greenspan warned global investors about a "dramatic contraction" in Chinese stocks.

After rising early, the Bovespa <.BVSP> index of the Sao Paulo Stock Exchange closed down 0.76 percent at 51,812 points on heavy volume of nearly 5 billion reais.

The index, which closed at a record 52,423 on Monday, has gained about 7 percent in May and some 18 percent in 2007.

Brazil's currency, the real <BRBY>, weakened 0.36 percent to 1.951 per U.S dollar, pressured in part by another central bank intervention to buy dollars.

The central bank has frequently bought dollars on the spot market and sold currency swaps to blunt the reals gains.

The real has traded below the 2.0-per-dollar mark since May 15, when it pierced that level for the first time in six years.

Interest rate futures <0#DIJ:> rose at the BM&F futures exchange in Sao Paulo, after rallying for much of the past two weeks after debt upgrades by Standard & Poor's and Fitch Ratings.

At the stock exchange, state-controlled oil giant Petrobras (PETR4.SA: Quote, Profile , Research) rose 0.64 percent to 47.20 reais, tracking gains in crude prices. Oil futures in London rose higher than $70 a barrel on increased tensions over Iran's nuclear program.

Iron ore giant CVRD (VALE5.SA: Quote, Profile , Research), which sells much of its exports in China, fell 1.45 percent to 71.50 reais.

The Sao Paulo Stock Exchange had net foreign investment of 217.14 million reais this month through May 18, according to figures released on Wednesday. Foreign investors bought 17.82 billion reais worth of stocks and sold 17.61 billion reais worth of shares.

I have been pumping some bucks into the Brazilian Market.......
Take a look at the Bull run the BVSP has made !

Here is the 3 year chart.............

Brazil stocks rise as Petrobras surges, real firms.......

SAO PAULO, Nov 8 (Reuters) - Brazil's benchmark stock index rose on Thursday, led by a surge in shares of Petrobras after the company announced a giant oil find, while the currency edged higher on rising capital inflows.

Foreign investors have poured more cash in Brazil seeking to benefit from its benchmark interest rate, among the highest in the world when discounted for inflation. The outlook of lower rates in the United States has also helped

"There is an excess of dollars in the market," said Jose Roberto Carreira, manager of currency trading at the Fair brokerage. "Rates (in Brazil) continue to be very attractive."

Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange in Sao Paulo fell, reflecting the improved market sentiment.

Shares of state oil company Petrobras (PETR4.SA), the top heavyweight at the Bovespa, jumped 10.95 percent to 76.85 reais and traded as high as 78.27 reais after the company confirmed a giant oil find with recoverable reserves of up to 8 billion barrels. The company's voting shares (PETR3.SA: Quote, Profile, Research) rose 11.35 percent to 90.77 reais, also among the biggest gainers in the Bovespa. For more details see [ID:nN08643638].

Real Estate developer Gafisa (GFSA3.SA) rose 5.56 percent to 34.2 reais. The company late on Wednesday reported a 12 percent rise in third-quarter profit to 30.94 million reais as a decline in borrowing costs fueled housing demand.

Iron ore giant CVRD (VALE5.SA) gained 2.39 percent to 54.06 reais, tracking gains in other mining stocks after BHP Billiton made a long-waited bid for rival Rio Tinto. The takeover offer, rejected by Rio Tinto's board, raised hopes of a new wave of acquisition activity in the mining industry. (Reporting by Silvio Cascione and Elzio Barreto)

IBOVESPA SAO PAULO (Sao Paolo:^BVSP)   

Index Value: 63,714.33
Trade Time: 10:16AM ET
Change:  +152.42 (0.24%)
Prev Close: 63,561.91
Open: 63,571.45
Day's Range: 63314.48 - 65281.09
52wk Range: 40,038.00 - 65,949.00

Brazil, the Bovespa Index, PBR and Me
May 01, 2008


Yesterday I was watching Petroleo Brasiliero (PBR) fight with US$116 and feeling all pleased with myself about the short at $124. I'd pencilled in a $10 drop at the time, and at one point there was less than a buck to go for my target cover price. Nice quiet day, I thought.

So I went to make some coffee and do other things. I couldn't have been away from the screen for more than 10 minutes. PBR had shot to $121. "Strange...", I thought.

It turns out that while I was away, super duper stockpicker Ken Heebner had been on CNBC and gave PBR the full bull treatment. And that guy is good...gotta be said. And people listen to him (which is a little silly after the fact, as Heebner owns 2m PBR at $88 and $95, but sheep is as sheep does, Forrest). Whoosh! Up she went, almost touched $122 and dropped back. "Good," I thought, "the hot money has now rushed in...we'll drop back to $118 or so by the end of the day."

Then came part two. Ken wrapped up his segment, and out of the blue S&P ratings announced they were raising Brazil's credit rating into the investment grade category. You can see the second spike on the PBR chart, but have a look at this BOVESPA index chart and take a wild guess as to the exact timing of the news:

Yep, the whole index went up 6.33% on today's news. Which is great stuff for Brazil, and you can catch what happened to the Brazil ADRs on this link (very green), but it didn't do my Petrobras short any good at all.

So PBE closed at $121 today, and I saw most of the profit wiped out in a flash. And y'know what, that's ok! I'm happy for Brazil, that's for sure...this investment grade should have been granted a while ago, I think. But with the massive jump on the news, and hype going round with title lines such as "..heralds new age of investment...", methinks the Bovespa will have to cool its jets a little in the shorter term.

Looking at what happened to the Peru stock market in the days that followed its recent upgrade should give a ballpark idea of what's about to happen to the Bovespa (but with a heap more money flowing around, of course).

It's also nice to be reminded there are a million ways of losing in this game, just as there are a million ways of winning. And just when you think you got all the bases covered is just around the time the unknown variable tends to kick in....for example a country-wide ratings upgrade right on the back of a top guru recommending a stock. Hey...no harm done...the trade is still in profit, and there's no way I'll be letting it run into loss. But just imagine if you had 51% of your portfolio in that PBR short instead of less than 1% like me......a quiet reminder to keep eggs out of one basket, especially in the volatile world of LatAm stocks.

Brazilian Government Debt Upgrade Good News for Latin American ETFs
May 02, 2008


According to news sources, Brazil's government debt has been upgraded. This had been expected in the second half of this year. So, this announcement caught investors off guard and pleasantly surprised.


By raising the rating to investment grade, Brazil's cost of capital will almost certainly decline. Additionally, the upgrade opens the door for more capital that is restricted to investment grade only.


Recently, news regarding the large oil fields off the Sao Paulo coast of Brazil had stimulated much investor excitement. This excitement was tempered with comments regarding questions as to the size of the fields (as high as 40 billion barrels - Tupi and Sugarloaf/Carioca fields combined) and the complexity extracting the oil (up to six miles deep, among other factors).


Investment Strategy Implications

One of the investment positions in the Model Growth Portfolio is iShares S&P Latin America 40 Index (ILF) - Latin America 40, which is comprised predominantly of Brazilian issues, some Mexican issues (mostly energy), and a smattering of other Latin American companies.

Brazil: Let the Feeding Frenzy Begin
May 02, 2008


...but be smart and take the short-term profits.


There will be plenty of time to position yourself for the long term once the S&P investment grade upgrade starts to make a real impact on the Brazilian economy. However the chances of hot money sloshing in tomorrow are pretty high, with articles such as this one linked here predicting 25% index gains for 2008 fuelling the sheep money fire (remember the ADRs traded in New York yesterday, but the Brazilian markets were closed for May Day).

So where are the trades? Let's assume you don't have access to the Brazilian market directly and want to play the ADR stocks; here are a few to consider:

ERJ: the Embraer ADR. This one has lagged the market somewhat this year, despite being a great Brazilian success story and having an order book stacked up in the billions of dollars. Expansions in workforce have started getting the planes out to customers more quickly recently. It's something of a national jewel, this one.

VIV: Mobile phone play Vivo jumped 6.4% yesterday, but there's plenty more where that came from. Sector consolidation in Brazil is making the competition less cut-throat., and VIV should begin to perform well on its bottom line. As the North loves a growth stock in a growth sector, I expect Vivo to be a hot money target.

CIG: Cemig is a Brazilian energy play that popped 2% yesterday, but it still under its 52 wk highs. At $21 now, if this breaks $23 it'll be off to the races. [CORRECTED]

SBS: Sao Paolo water company SBS is sitting here at a great, great price. Dividend yield is attractive, and I have its forward PE pegged at 8X presently. That could easily expand to 12X now that investment grade is here. SBS is probably my top Brazil pick from here, but at the same time may not get the first wave of hot money washing over it.

ITU: Banco Itau got a big pop on strong volume yesterday on the investment grade news, and will be one of the first in line to receive hot money when Sao Paolo opens tomorrow. It may be close to fully priced on fundamentals right now, but there may well be a lack of logic in Brazilian trading over the next couple of sessions. Trade it on a momentum basis.

GGB: Gerdau Steel has resisted all downgrades on its climb to its current all time high. With a PE of 11.5X right now, there's more in the tank now that Brazil is "officially a serious country"*. Again, don't be afraid to take a short term profit on GGB, but be thinking about a longer term position afterwards.

So there are six ways to play the investment grade party. You'll notice that PBR and RIO aren't on the list. This because they're already 'world class' investment risks and won't be first in line to get "the pop" from this news. Another way to play Brazil is the useful ETF play, EWZ. Finally, the Brazilian bonds may have tightened considerably these last 48 hours, but with the high interest now on offer to more institutional money, they will still have plenty of buyers on Friday. Another good option to consider.

I hope this little overview helps in its own small way. However I'm sure you'll need to do more DD on any or all of these before making a good investment decision.

A Brasilian Beauty!  ;) ;D

Is Brasil the next United States of America? Is the USA the next Brasil?
If you haven't followed developments in Brasil's economy over the past decade, you've missed one of the great success stories of our time.

     Brasil is one of the so-called BRIC economies (Brasil, Russia, India and China), which are now developing to the point of actually having achieved something.

     Brasil is my favorite among these top developing economies for a number of reasons. But before I go further, I should reveal a prejudice.

     A few years ago, I remarried to a stunning young woman who was a recent Miss Brasil. Through her good graces, I have come to know Brasil better than an outsider typically would after visiting sporadically. Luckily, my wife is not only beautiful but also her family is well connected at the highest levels of Brasilian commerce and politics.

     My wife tweaked an interest in Brasil

     I can report from first-hand experience that Brasil is a country where you can live exceedingly well.

     Not only is it a great country in which to be rich, it has also become a great country in which to become rich. Brasil has more millionaires than India or Russia. In 2007, a new millionaire was minted in Brasil on average every five minutes of every business day.

     Brasil and the U.S. Trade Places?

     Ironically, while most Americans were looking the other way, Brasil flourished with the sort of sound fiscal and monetary policies that helped the U.S. attain prosperity.

     For example, Brasil ran a comfortable budget surplus of 4% to 5% of GDP for the past four years. Brasilian inflation is under control. The country also runs annual trade surpluses.

     And as the world's leading producer of biofuels, Brasil is energy independent.

     Meanwhile, the U.S. has run staggering trade and budget deficits of the kind that led to hyperinflation in Brasil in the last century.

     As we enter 2009, the U.S. budget deficit has swollen to a multi-trillion-dollar improvisation of bailouts and rescues sure to debase the dollar and downgrade the living standards of those solely dependent on dollar income.

     Just as it once would have been folly to trust your savings to the Brazilian government, I believe it is now folly to trust your savings to the U.S. government.

     In fact, I would not be surprised if the U.S. dollar as we know it ceases to exist in the next five years.

     That's because the pattern in every country that fouls its currency through hyperinflation is to scrap the tarnished brand and issue a new currency after hyperinflation has made the old one repugnant to the people it betrayed.

     Germany had six currencies in the twentieth century. It scrapped all but the euro in the wake of runaway inflation or collapse.

     To say the dollar is heading for oblivion may seem exaggerated or unpatriotic. But it would be rather thick of us to miss the point when the leading U.S. monetary authorities have been at pains to explain that it's their conscious policy to devalue the dollar.

     I am sure that the great damage the concerted policy of inflation by the U.S. government would cause is an argument for diversifying cash reserves and currencies outside the U.S. Hence the attractiveness of Brasilian government bonds, which you can buy for the time being at a discount courtesy of hedge funds that have dumped Brasilian assets in a scramble to raise cash.

     Hyperinflation once plagued Brasil. The source of this was a relentless expansion of the money supply. The Brasilian government used to finance its operations and development projects not out of taxes or by borrowing funds but simply by creating money.

     In other words, the cause of Brasil's hyperinflation is the very policy Washington is now adopting.

     As a result, from 1980 through 1997 the price level in Brasil increased by a factor of one trillion. Per capita real income growth ceased during this period.

     Almost every Brasilian adult -- even my wife, who was born in 1980 -- has unhappy memories of this period. And Brasilians have no wish to return to policies that destroyed their economy.

     Remember, the Germans became the foremost foes of inflation in Europe in the twentieth century after suffering grievously with hyperinflation.

     This is one reason why the Brasilian real is a better bet going forward than the dollar. No people who have been through hyperinflation want to repeat the experience.

     Given these prospects, the crisis has handed us an opportunity. Buy Brasil...  ;) ;D Sell the dollar.

Happy Investing,

Brazil shares fall with global stocks, real eases
Mon Apr 20, 2009 12:17pm EDT


BRASILIA, April 20 (Reuters) - Brazilian share prices fell on Monday, tracking a worldwide slump in stocks amid renewed worries about the global financial sector, while the national currency also eased.
Sao Paulo's main stock index, the Bovespa .BVSP, shed 3.08 percent to 44,367.42, led down by commodity and banking stocks.

World stocks slipped from last week's three-month highs as news of a big increase in troubled loans at Bank of America (BAC.N) made investors nervous.

The bank said its purchase of Merrill Lynch more than doubled its quarterly profit but results included a big increase in troubled loans and the bank's shares tumbled 17 percent.

Banks in Brazil fell in sympathy with U.S. losses.

Banco do Bradesco (BBDC4.SA) fell 3.55 percent to 25.27 reais, Banco do Brasil (BBAS3.SA) shed 1.96 percent to 18.05 reais and Itau (ITAU4.SA) fell 3.64 percent to 27.27 reais.

Oil giant Petrobras (PETR4.SA) fell 3.57 to 27.29 reais as oil prices CLc1 shed more than 8 percent.

Vale (VALE5.SA) fell 1.98 percent to 29.21 reais as copper prices slumped 4.28 percent and after announcing it was selling iron ore to customers in China at a discount of 20 percent pending negotiation of a new benchmark price for 2009.


Commodity stocks tend to suffer when the prospect for the world economy worsens on the belief that there will be less global demand for metals and energy products.

Steelmakers tracked metal prices lower with CSN (CSNA3.SA) falling 4.20 percent to 38.57 reais, Gerdau (GGBR4.SA) falling 3.95 percent to 14.84 reais and Usiminas (USIM5.SA) down 4.98 percent to 32.98 reais.

Brazil's currency, the real BRBY, gave up nearly 2 percent to 2.235 per dollar as the greenback rose against a basket of currencies .DXY.

Interest rate futures <0#DIJ:> were mostly higher despite analysts revising down further their expectations of growth this year to a contraction of 0.5 percent, in the latest weekly central bank survey of local institutions.


Below is the BVSP 5 year chart...

EMERGING MARKETS TAKING THE LEAD.......

As the markets have rallied off the March 9th bottom, we find it rather interesting that the Emerging Markets have taken a lead role and have outperformed rather handily. The growing consensus believes that when the worlds' stock markets do bottom, then the Emerging Markets will take the role of "leader" once again. However, we would caution, for rarely do the leaders of past bull markets lead new bull markets. Moreover, and from a fundamental perspective...much of the Emerging Market economic growth was built upon the back of Western credit expansion and conduits to these countries rather than internal growth. Western banks were simply "reaching for yield"; and with higher yields come higher risks. We can only look at the debacle occurring in Eastern Europe; but that is a discussion for another day.

We would like to look at Brazil's BOVESPA Index, for it is quite simple from a technical perspective to delineate both bull and bear markets. And, it appears an inflection point / delineation point has just been reached - the 16-month moving average. For now, prices are weakening from this level, and if the 2000 to 2003 bear market is any guide, then the weakness we've seen from this level will continue and perhaps will result in a test of the lows quite far below current levels. If not, and prices rally above this level - then we can be rather comfortable with believing a new bull market has been born, and we should do nothing more than be buyers.

For now, the risk-reward favors selling short Brazil, and one can do that via EWZ; however, if the 16-month is violated to the upside, then one should be a buyer. We believe a bear market is in force given the manner in which the 5-month RSI is trading, but our battle line at the 16-month is drawn, and now we can asses our risk and trade around it.

Good luck and good trading,

Brazil Bovespa index down 3 pct on commodity drop
Thu May 21, 2009 2:30pm EDT

SAO PAULO, May 21 (Reuters) - Brazilian stocks slumped 3 percent in late afternoon trade on Thursday, the biggest rout in five days, as commodity prices dropped in international markets.
The benchmark Bovespa index .BVSP lost 3 percent to 49,689.90 points, its lowest since May 15, dragged down by energy giant Petrobras (PETR4.SA) and mining company Vale (VALE5.SA). The companies have the heaviest weighting in the index.

Vale, the world's largest iron-ore producer, shed 3.9 percent to 32.01 reais. Petrobras, the state-controlled oil company, dropped 2.7 percent to 32.25 reais as oil prices CLc1 fell 2 percent in New York.

CORRECTED - Brazil stocks waver as Wall St slips, but currency up
Tue Jun 23, 2009 12:33pm EDT

SAO PAULO, June 23 (Reuters) - Brazil's stocks seesawed on Tuesday as oil giant Petrobras shares' gains were offset by worries about the health of the world economy.

U.S. existing home sales increased at a slower-than-expected pace in May, indicating the U.S. economy's recovery from a severe recession is likely to be tepid. Brazil's markets care about U.S. data as far as it's indicative of how the world's largst economy is doing.

Brazil's local currency gained slightly after the previous day's plunge.

Over the past three months, Brazilian assets have rallied as hopes for a global economic recovery whetted investors' appetite for risk and emerging market assets. But investors were now reassessing the extent of the economic rebound because of mixed data and an uncertain outlook.

Brazil's Bovespa index .BVSP was little changed, up just 0.01 percent, at 49,498.28 points in choppy trade after falling more than 3 percent in the previous session. The index is in negative territory in June after rallying for three straight months, but it has gained more than 31 percent so far in 2009.

The market's fluctuations occurred against the backdrop of losses on Wall Street, where U.S. stocks slipped as Boeing again delayed the first test flight of its Dreamliner aircraft and the existing home sales data raised concerns about the strength of a potential economic recovery.

Brazil's real gained 0.6 percent to 2.01 per U.S. dollar, but is still weaker for the month against the dollar.

"It's an adjustment after a very strong movement generated by a rise in risk-aversion abroad yesterday," said Silvio Campos Neto, chief economist at Banco Schahin.

The real has strengthened around 16 percent against the dollar so far this year -- a rally that has made government officials worried about the prospects for local exports.

At the stock exchange, financial shares led losses. Itau Unibanco (ITUB4.SA) shed 1.22 percent to 30.01 reais, Banco Bradesco (BBDC4.SA) fell 1.37 percent to 28.01 reais. Brazilian financial and commodities exchange operator BM&F Bovespa (BVMF3.SA) fell 1.01 percent to 10.80 reais.

Market heavyweight Vale (VALE5.SA) also weighed on the index, falling 0.43 percent to 29.81 reais even as copper prices rose.

The downside was limited by Petrobras (PETR4.SA), which gained 0.32 percent to 30.96 reais, rebounding after its 3.4 percent slump on Monday.

Steelmaker CSN (CSNA3.SA) also gained 0.7 percent to 41.95 reais after the company said it had hired 1,200 workers at its Volta Redonda plant following signs the market is recovering. Late last year, it had cut 1,300 jobs as the global economic crisis cut into demand for steel. Elsewhere in the sector, Gerdau (GGBR4.SA) gained 1 percent to 19.24 reais as metal prices rose.

Interest-rate futures <0#DIJ:> were broadly lower, with the central bank still widely expected to ease monetary policy further even if at a slower pace.

Last week Brazil's central bank said it saw "residual leeway" for future interest-rate cuts in minutes from its rate-setting meeting earlier in the month, signaling it will reduce borrowing costs at a slower pace.

Bovespa operates at high opening...

On Thursday 09/09/2010 at 10:52
São Paulo, 9 set (EFE) .- The Index of the Stock Exchange of Sao Paulo (Bovespa) opened Thursday at high 0.19%, to 66,530 points.
In the first 16 968 transactions, trading volume was R $ 262 million.
Leading the high, the paper's preferred fuel distributor Ultrapar (1.53%).
Diminishing, the Embraer common shares (-0.95%).
The preferred shares of Petrobras fell 0.54% and were the most traded with a share of 28.46%.
On the exchange market, the dollar retreated 0.17%, Rated R $ 1.720 to purchase and U.S. $ 1.722 for sale.

Brazil stocks rise as consumer confidence rises...

Brazilian stocks rose Wednesday, finding support from a report showing a rise in confidence among consumers in Latin America's largest economy.

Investors also assessed data from the central bank that show loan growth accelerated last month.

Brazil's Bovespa equity index rose 0.9% to 68,205.18, erasing its 0.7% decline in the previous session.

Gainers on Wednesday included home building stocks, including a 5.8% rise in shares of MRV Engenharia, a 4.4% rise in PDG Realty and a 1.1% gain in Gafisa (GFA).

Earlier in the session, the Getulio Vargas Foundation, also known as FGV, said its consumer confidence index for September rose 0.7% to 121.7 from August, the highest reading for the index since it was established in 2005, noted RBC Capital Markets. The index has now risen for seven straight months. The index's historical average is 107 points.

Separately, Brazil's central bank said lending by private sector and state-run banks expanded at the fastest rate in more than a year. In August, outstanding loans rose 2.2% from the previous month, marking the largest month-over-month increase since July 2009.

At the same time, the rate of loan delinquency fell to 4.8% from 4.9% in July, the bank said.

Citigroup told clients in a note Wednesday that it remains bullish on Brazilian banking stocks. The broker expects a positive environment for earnings in the second half of this year and into 2011 "as loan growth is picking up, and lower delinquency rates should allow for lower loan loss provisions going forward," wrote Citi analyst Daniel Abut.

Also, banking firms Itau Unibanco and Santander Brasil should continue to experience cost synergies from their respective mergers, "providing an additional boost to bottom line growth," he wrote.

Shares of Itau (ITUB) closed 0.7% higher while Santander Brasil (BSBR) shares fell 0.8%. Stock in Banco Bradesco (BBD) closed up 0.7% and shares of state-run Banco do Brasil rose 1.3%.

In other regional market action, Mexico's IPC fell 0.3% to 33,207.21. Chile's IPSA fell 1% to 4,772.29 and Argentina's Merval shed less than 1 point to end at 2,531.64.

Two Ways to Add Brazil to
Your Investment Portfolio

Today, the Brazilian real is strong (and the dollar is weak). The real is now at a 10–month high against the U.S. dollar (having risen 40% from its lows in early 2009). This prompted the Brazilian finance minister to threaten weakening the real. You've probably heard of his comment about a "currency war."

What he fears is that the strong real will hurt Brazil's export goods by making Brazilian goods more expensive, hence weakening Brazilian economy. It is a tired line of reasoning. This idea that a country gets rich by destroying the value of its currency is a weed that won't go away no matter how many times you pull it from the soil.

What's curious about this is that you'd think a Brazilian would appreciate the dangers of weakening a currency more than most. Brazil has had a habit of blowing up its currency over the last 60 years.

From 1942 to the present, Brazil went through eight different currencies:
•   Mil Reis, 1833-1942
•   Cruzeiro, 1942-1967
•   Cruzeiro Novo, 1967-1986
•   Cruzado, 1986-1989
•   Cruzado Novo, 1989-1990
•   Cruzeiro, 1990-1993
•   Cruzeiro Real, 1993-1994
•   Real, from 1994.

The present-day real is but a teenager, a mere youth sprung from a bad family. Yet it is among the world's strongest currencies today, bolstered by the commodity wealth and strong growth rate of Brazil's economy.

Say what you will about the U.S. dollar, which has been a poor currency as far as retaining its purchasing power over time, but it's never gotten so bad that we had start over — at least not yet. Brazil's experience makes the dollar look like a gold standard. It was not that long ago that Brazil's inflation rate hit 2,700%. It happened in one 12-month period from 1989-1990.

Even as late as 1999, Brazil was a financial basket case. In 1998 and 1999, its finances were such a mess that Brazil got the biggest IMF rescue package in history up to that point, $41.5 billion.

During the 20th century as a whole, Brazil had a cumulative inflation rate of more than a quadrillion percent. If you were a net saver in Brazil and kept that money in Brazil's currency, you lost big. You might as well have set the money on fire.


Today, Brazil is in a different position. The currency is so strong, its politicians fret. American travelers find no bargains in the shops of Sao Paulo or Rio. Brazil, too, has huge currency reserves and is now a net creditor, not a debtor. Brazil is even accumulating gold — the real thing. We met with an economist on our trip here who made a presentation that showed Brazil's central bank has 5% of its reserves in gold — and it's been buying more.

Today, U.S. investors go out of their way to buy products that give them exposure to Brazilian reais, instead of U.S. dollars. It's incredible when you think how much things have changed in just the last 10 years.

Of course, Brazil could screw it up again.

There are some worrisome signs. The new favorite for president is Dilma Rousseff. She is a former Marxist guerrilla. Captured in 1970, she was beaten and tortured. Hers is a quite a tale, and you can find out more about her on the web. The Wall Street Journal also recently featured a front-page story about her.

Suffice to say, she has since mellowed out, supposedly. Most see her as simply continuing the policies pursued under current President Lula. But we'll see...

As with any emerging market, there are big problems, but also big opportunities. Still, Brazil's economic challenges seem less complicated and smaller than those in the U.S., where debt and deficits are much larger. And currency screwups are relative. Forced to make a choice, I'd rather bet on the Brazilian real than the U.S. dollar.


If you want to add exposure to economic growth in Brazil, the easiest solution is to buy Brazilian stocks – thereby avoiding (some of the) risks of inflation in the real. If you're not familiar with specific Brazilian companies, the easiest option is to buy shares of one of the popular Brazilian exchange-traded funds on the market.

Leading the pack is the iShares MSCI Brazil ETF (NYSE: EWZ), a fund with more than $11 billion under management, weighing in as the largest single country ETF outside of the United States. But for penny stock investors, another attractive option is the Market Vectors Brazil Small Cap ETF (NYSE: BRF), a much smaller fund that focuses exclusively on small-cap stocks in Brazil.]

Brazil...
The Bovespa index is headed for a test of resistance at 72000 after breaking 68000. Rising Twiggs Money Flow (13-week) signals buying pressure. In the long-term, breakout above 74000 would offer a target of 80000*. Reversal below 68000, however, would test primary support at 64000.

Target calculation: 70000 + ( 70000 - 60000 ) = 80000


Markets cautious after quarter-end...
Secondary Asian markets are climbing, but Japan and mainland China remain weak. Europe looks anemic and North America is likely to follow. Resource-rich Australia and Brazil have broken out, but tentatively, and are unlikely to follow-through unless we see a recovery in Japan and mainland China. Quarter-end has passed, together with any motivation for fund managers to support current price levels. Expect a mid-October retracement to test support levels.

How to Profit from São Paulo's Housing Boom...

Someone once said that the city of São Paulo was as if LA threw up on New York. That's an imaginative way to describe this sprawling metropolis. It's a bustling, congested city of 11 million people, with another 9 million in the suburbs. Greater São Paulo ranks as the third largest urban area in the world, according to the United Nations, after only Tokyo and Mexico City.

For many, it's an ugly city, but I loved it right away. While gloom and doom hover over the economies of the U.S. and Europe, it is impossible to maintain a sense of pessimism in São Paulo — or Brazil, for that matter. It's a showcase for the kind of changes sweeping over the emerging markets.

São Paulo had a humble beginning. Jesuits founded it on the banks of the little Tietê River in the 16th century. It was for hundreds of years an insignificant settlement. Even as late as the 1870s, it had only 26,000 inhabitants, cobbled around narrow streets.

But it would go on to put up perhaps the greatest population growth curve of any major city in human experience (as the Fernand Braudel Institute maintains). A great coffee boom in the 19th century was the kindle that sparked São Paulo's growth. By the 1890s, the population tripled. And today, there are 20 million people in greater São Paulo.

The state of São Paulo has 45 million people and makes up nearly a third of Brazil's economic output. Half of the country's tax base is here. If it were its own economy, the state of São Paulo would be the second largest in South America — behind only Brazil and ahead of Argentina and Colombia. It is also home to Brazil's stock market, the fourth largest in the world by market cap.

São Paulo did not grow up slowly around a center, as did the cities of Europe. Rather, it grew hastily and in an improvised manner. You can see the consequences of that process today. Traffic is horrendous. It can take more than an hour to move only a handful of blocks. The subway system is not up to the task of serving the entire city. And record car sales overwhelm the construction of new roads.

There is also an acute housing shortage, which is where an interesting investment opportunity lies. There are a lot of ways to show the data on housing. One common way to measure housing shortages is to look at how many families have three people per bedroom. This measure shows about 13% of families live in substandard housing. Expressed as a number of units, Brazil needs nearly 6 million new homes.

That's really not surprising when you think of the swelling ranks of the middle class. Millions of people have become consumers in the last decade. Housing has not yet caught up with that demand. By some estimates, Brazil needs to build about 1.6 million homes every year just to keep up with new families entering the market.

In São Paulo, you can also see the shortage in the price of homes. New construction often takes three years. People now taking delivery for housing units bought three years ago find that the value of their dwelling doubled.

All that frothiness has some people worried about a housing bubble. Brazil's mortgage market, too, is in hyper-growth mode. Take a look at the total loans to homebuilders and buyers.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=49500)

It looks impressive, but the starting base was very low. Brazil's home lending market is still only a fraction of that found in other Latin American countries, such as Mexico or Chile. Brazilians also have much more equity invested in their homes. Typically, loan-to-value is 70–75%.

Eventually, supply will catch up with demand, and maybe even exceed it. Then you'll have a correction. But that day seems years away.

There is a direct way to play the São Paulo housing boom. It's a mid-cap Brazilian homebuilder with penny stock growth potential.

Brazil...
The Bovespa index reversed below support at 70000, warning of a correction. Small bearish divergence indicates a lack of selling pressure. Expect a test of 68000. In the longer term, recovery above 72000 would test the 2008 high of 73500/74000.

* Target calculation: 70000 + ( 70000 - 60000 ) = 80000

Brazil...
The Bovespa index broke resistance at 72000. Twiggs Momentum (21-day) holding above zero indicates a strong up-trend. Expect retracement to test the new support level, followed by a rally to the 2008 high at 73500/74000.

* Target calculation: 70000 + ( 70000 - 60000 ) = 80000

Suggest to keep in mind the following tickers related to Brazil depending on the
acceptable risk you may want to take:
EWZ - ILF - LBJ (triple long).

KRgds

Hector

Quote from: hectorgr on November 10, 2010, 03:05:19 PM
Suggest to keep in mind the following tickers related to Brazil depending on the
acceptable risk you may want to take:
EWZ - ILF - LBJ (triple long).

KRgds

Hector

hectorgr,
Thanks, it's good to see someone jump in and reply.
3SOF. now sometimes seems like a ghost town... :(

good trading to you.
regards
setravis

Bloomberg

Brazil Sets Reserve Requirement to Stem Real Rally
January 06, 2011, 5:39 PM EST

Brazil's central bank set reserve requirements on short dollar positions held by local banks in its third attempt since October to stem a rally in the currency. The real fell for a third consecutive day.

The new rules have the potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank's director of monetary policy told reporters in Brasilia.

Starting April 4, Brazilian banks will need to deposit in cash at the central bank 60 percent of their short positions in U.S. dollars above $3 billion or their capital base, whichever is smaller. The reserves will not earn interest, Mendes said.

"The international environment is challenging and generates the need to focus on financial stability," central bank President Alexandre Tombini said. "The central bank takes measures when it decides to take it. This was the adequate moment."

Policy makers in Latin America are trying to stem currency gains as fast economic growth and low interest rates in rich nations attract capital inflows to the region. Finance Minister Guido Mantega said this week that Brazil's government is ready to take new measures to prevent the dollar from "melting" and stem the real's 37 percent rally against the dollar since 2009.

Excessive Positions

Tombini said the short dollar positions were excessive relative to the size of the currency market, prompting the central bank to set the reserve requirements. He cautioned Brazilian companies, saying that in a floating regime the exchange rate can swing both ways and that high levels of international liquidity were unlikely to persist.

"This measure is probably the first of a series of moves that the new government will announce -- they will do what it takes to hold the real," Marcelo Salomon, chief economist for Brazil at Barclays Plc in New York, said in a phone interview.

The measure could weaken the real in the short-term, though is unlikely to have a lasting effect, said Andre Perfeito, chief economist at Gradual Investimentos. The real's appreciation is based on "fundamentals," he said.

Since October, Brazil's central bank has twice raised, to 6 percent, a tax foreigners must pay to buy fixed income and derivative assets. President Dilma Rousseff, in her inaugural address Jan. 1, pledged to protect the country "from the indiscriminate flow of speculative capital."

Brazil's real fell as much as 1.17 percent after the announcement before paring losses. The currency weakened 0.8 percent to 1.6869 per dollar. Yields on the interest rate futures contract due in January 2012 rose 1 basis point to 12.1 percent.

Latin America

Other emerging markets including Chile and Peru have stepped up their battle against the weak dollar in recent days.

Chile this week said it will buy $12 billion in the foreign-exchange market to weaken the peso, the region's best- performing currency over the past six month. Peru's central bank on Jan. 1 extended reserve requirements for banks to their overseas units to stem inflows increasing volatility in the sol.

'Infinite' Tools

Mantega said Jan. 4 that the government has an "infinite" number of tools at its disposal to affect the country's exchange rate and support exporters hurt by the currency gains.

Brazil's trade surplus narrowed 20 percent last year from 2009 as a stronger currency and the fastest economic growth in more than two decades fueled imports.

Perfeito said today's move by the central bank shows that Rousseff's top concern is preventing the real from strengthening further. The move raises the risk bank President Tombini won't raise the benchmark Selic rate this month to control inflation running at a 23-month high, he said.

"Perhaps they won't increase the Selic at the next meeting, because they are trying so hard to control the exchange rate," Perfeito said. "That's my worry right now."

Traders are betting policy makers will raise the benchmark rate by 50 basis points, to 11.25 percent, at their Jan. 18-19 policy meeting, according to Bloomberg estimates based on interest rate futures contracts. Brazil's real interest rates accounting for inflation, the highest in the Group of 20 nations, are a magnet for speculative capital, Mantega has said.

Inflation Jump

Brazilian consumer prices, as measured by the IPCA-15 index, jumped 5.79 percent in the 12 months through mid- December. That's the highest inflation rate in almost two years.

Mendes said today's move had no connection with monetary policy.

In 2009, Brazilian banks held $2.9 billion in long positions in dollars, swinging to $16.8 billion in short positions at the end of 2010, Mendes said.

"It's bad for the economy when the system swings to one extreme," Mendes said.

The measures are "prudential" and could spur dollar purchases that weaken the real and reduce the central bank's daily dollar purchases, he added.

Nelson Barbosa, the Finance Ministry's executive secretary, said today's measures had been under consideration since 2008 and will reduce volatility in the foreign exchange market.

Brazil Current Account Deficit to Widen to $64 Billion in 2011...

Brazil's current account deficit will widen to $64 billion in 2011, up from $49 billion in 2010, according to central bank estimates published today.

Previously the bank had seen the 2011 deficit at $60 billion.

Brazil Leaves Options Open for 2011 Rate Increase...

Brazil's central bank kept its options open for when it lifts interest rates to cool inflation running at a five-year high, after leaving its benchmark rate unchanged yesterday at President Henrique Meirelles' final board meeting. Yields fell across the board.

Policy makers including Alexandre Tombini, who is slated to succeed Meirelles next month, voted unanimously to keep the Selic rate unchanged at 10.75 percent. The decision matched the forecast of 48 of 51 analysts surveyed by Bloomberg. Three economists forecast at least a quarter-point increase.

The eight-member board, in a statement, said they faced a "less favorable scenario" than in their last meeting, and they needed "more time" to gauge the economic impact of new reserve requirements on banks to curb the growth of credit.

"There is no smoking gun here that they are going to hike rates in January," Marcelo Salomon, chief Brazil economist for Barclays Capital, said in a telephone interview from New York. "The markets are going to re-asses the probability that they are going to hike already in January."

Traders pared bets on a half-point rate increase next month. The yield on interest-rate futures contracts maturing in January 2011, the most traded on the Sao Paulo BM&F exchange, fell 8 basis points to 10.64 percent at 6:52 a.m. New York time. Yields on contracts due February fell 11 basis points to 10.72 percent.

The bank's Dec. 3 announcement of an increase in reserve and capital requirements for bank deposits has introduced uncertainty about the time and magnitude of the rate increases, said Gray Newman, chief Latin America economist at Morgan Stanley.

'Delay Again'

"The language today didn't clarify that at all," Newman said in a telephone interview from New York. "It leaves the door open for them, they could delay again."

The world's eighth-largest economy expanded 0.5 percent in the third quarter from the previous three months, the national statistics agency said today in Rio de Janeiro. The figure, while higher than the 0.4 percent median forecast in a Bloomberg survey, was the slowest quarterly expansion since Brazil emerged from the global financial crisis in the second quarter of 2009.

Gross domestic product grew 6.7 percent from the same quarter a year ago, spurred by a 21 percent increase in investment and 5.9 percent growth in consumer spending.

The economy will grow 7.54 percent this year, its fastest pace in more than two decades, according to the most recent central bank survey.

Retail sales grew 11.8 percent in the year through September, the fastest pace since March. Unemployment fell to a record low 6.1 percent in October.

Domestic demand, buoyed by consumer lending growing at a 20 percent annual pace, is fueling an acceleration of inflation.

Inflation Surge

Consumer prices, as measured by the benchmark IPCA index, rose 5.63 percent in November from a year earlier and 0.83 percent from October, the biggest monthly increase since April 2005.

Inflation expectations for 2011 have accelerated to 5.2 percent, from 4.8 percent in August and 4.5 percent in March, according to the central bank survey.

"The inflation picture is worsening and argues for policy response," said Marcelo Carvalho, head of Latin American research at Banco BNP Paribas Brasil in Sao Paulo. Carvalho expects Tombini to raise the Selic by at least 50 basis points next month.

Tombini

Tombini, who has been on the bank's board since 2005, won Senate committee approval to be the bank's next president on Dec. 7. At his confirmation hearing he echoed remarks made by Meirelles that higher reserve levels would have an impact on the economy, even though they aren't a substitute for traditional monetary policy tools.

President-elect Dilma Rousseff has pledged to contain spending next year in a bid to reduce Brazil's real interest rate, the highest in the Group of 20 nations.

Higher borrowing costs are also putting pressure on the real, as investors buy higher-yielding currencies with funds borrowed at lower rates. The real, which is the best performer among 16 major currencies tracked by Bloomberg over the past month, appreciated 0.1 percent to 1.6894 per U.S. dollar.

"Although the statement raises doubts on when they will resume rate increases, policy makers need lower inflation expectations and a strong fiscal adjustment to avoid raising rates," said Pedro Tuesta, a Washington-based economist for Latin America at 4Cast Inc. "There won't be enough time for that before the January meeting."

Brazil Credit Measures May 'Precede' Policy Action...

Brazil's decision this month to raise banks' reserve requirements to slow credit growth may "precede" conventional monetary policy action, the central bank said.

The central bank, in the minutes of the Dec. 7-8 meeting, said the "macro prudential" measures are a "fast and powerful" tool to contain localized demand pressures and will have an impact on prices that jumped by the most in five years last month. Policy makers said they must remain "especially vigilant" to prevent short-term inflationary pressures, pushed by higher food prices, from extending over time.

Policy makers voted unanimously to keep the Selic rate at 10.75 percent for a third straight meeting last week, matching the forecast of 48 of 51 analysts surveyed by Bloomberg. Three economists forecast at least a quarter-point increase.

The minutes show that the central bank is likely to raise borrowing costs 50 basis points at its Jan. 18-19 meeting to 11.25 percent, said Marcelo Carvalho, head of Latin American research at Banco BNP Paribas Brasil in Sao Paulo. The meeting will be chaired by Alexandre Tombini, who the Senate confirmed yesterday as President-elect Dilma Rousseff's choice to succeed Henrique Meirelles as bank president.

"They are paving the way for upcoming hikes," said Carvalho in a phone interview. "The timing is left open, but all the conditions are set for Tombini to hike in January."

Yields Rise

Yields on interest-rate future contracts due before July 2011 rose, as traders increased bets on rate increases next year. The yield on the contract due in April 2011, the most traded in Sao Paulo today, rose 1 basis points to 10.93 percent at 7 a.m. New York time. The real strengthened 0.3 percent to 1.7037 per U.S. dollar.

In holding rates steady this month for the third-straight meeting, policy makers including Tombini said they needed "more time" to gauge the economic impact from recent measures to slow credit growth. Policy makers on Dec. 3 boosted reserve and capital requirements for lenders to remove about 61 billion reais ($36 billion) from the economy.

Not a 'Perfect Substitute'

The bank, in its minutes today, said the measures aren't a "perfect substitute" for raising interest rates, since they are part of an effort to reverse stimulus measures adopted during the global financial crisis.

Recent economic data signaling the expansion of Latin America's biggest economy is easing may provide more space to Tombini to decide the timing of an expected rate increase.

Retail sales rose 0.4 percent in October from September, less than the 1.1 percent median forecast by 25 economists surveyed by Bloomberg, the national statistics agency said Dec. 14. The IGP-M price index, the nation's broadest gauge of inflation, rose 0.83 percent in the first preview of December, less than the 0.95 percent median forecast.

The bank said that higher food prices had affected inflation "strongly" and "negatively," since its October meeting. Gas prices, which the bank previously saw remaining unchanged this year, are now expected to rise 1.6 percent.

Policy makers said they no longer see the weak global economy helping to contain price pressures.

"The likelihood of seeing some disinflationary influence from abroad has fallen, although substantial uncertainty persists over the behavior of asset and commodity prices in the context of substantial volatility in international financial markets," the minutes said.

"The minutes take a more realistic view of inflation, recognizing the recent worsening," Carvalho said.

Consumer Prices

Brazil's consumer prices, as measured by the benchmark IPCA index, rose 0.86 percent in November, the biggest jump in five years. The annual inflation rate was 5.63 percent in November, the highest level since February 2009. The central bank targets annual inflation of 4.5 percent, plus or minus 2 percentage points.

Inflation expectations for 2011 have been rising since August. Consumer prices will climb 5.21 percent next year, according to the median forecast in a Dec. 10 central bank survey, up from an August forecast of 4.80 percent.

Third quarter gross domestic product grew 0.5 percent from the previous quarter and 6.7 percent from a year earlier.

Brazil's Prospects for Growth
Paulo Leme, Goldman Sachs' emerging markets chief, says his native Brazil should seize a historic opportunity for growth as a new President takes over

How do you see Brazil right now?
The economy is growing at almost twice the rate that it has in the last 10 years. Brazil is experiencing a fairly healthy increase in employment and wages, and an improvement in income distribution, so there is a feel-good factor. I would say this is a once-in-a-century kind of opportunity to accelerate growth to 6 or 6.5 percent and unleash all of this upward mobility.

How can Brazil make that happen?
The key is structural reform—for example, a reduction in the tax burden, which would make exports more competitive. Also things that would boost productivity, like better education and a better health system.

Is Brazil growing too fast?
Domestic demand is outstripping supply. The appreciation of the real also makes it cheaper to import from the rest of the world. Brazil would benefit enormously from some containment in fiscal spending and public credit growth and moderation in public-sector wage hikes.

Is that the direction you expect from President-elect Dilma Rousseff?
She has the awareness and possibly the inclination to do some rebalancing of macroeconomic policies. We are on the eve of another significant monetary easing by central banks in advanced economies. However, at some point they will tighten significantly. The question is, will that lead to a sudden stop of capital flows or even a reversal? Brazil's macro policy should be prepared for that eventuality.

Brazil's Credit Boom Could End in Tears
Consumer credit has shot up fivefold since the end of 2002. Now Brazil's leaders are moving to head off a subprime-style crisis

The Nov. 9 rescue of Brazil's 21st-largest bank, Banco PanAmericano, has exposed cracks in what many had regarded as one of the most solid financial systems among emerging-market countries. Brazil's economy grew at a 8.4 percent clip in the first nine months of 2010—its fastest pace in more than 15 years—powered in part by a sharp increase in government-subsidized loans and a rapid expansion in consumer credit. That can be a lethal cocktail. The data in Brazil are troubling: Late payments on credit cards and other consumer loans jumped 23 percent in November from a year earlier, prompting government leaders to begin scaling back their easy-credit policies. "It's time to be a little bit careful about the B in BRIC," says Jim O'Neill, chairman of Goldman Sachs Asset Management (GS) and the man who coined the BRIC acronym for Brazil, Russia, India, and China.

Former President Luiz Inácio Lula da Silva, a founder of Brazil's Workers' Party, impressed Wall Street with his commitment to free-market policies. Yet even he was unable to resist the temptation of indulging in an age-old Brazilian tradition: the election-year splurge. The national development bank, known as BNDES, made $101.1 billion in loans in the 12 months to October, a 33 percent increase from the same period a year earlier. Lula's protégée and successor, Dilma Rousseff, pledged to rein in spending as she assumed power on Jan. 1.

Bankers in New York, London, and as far away as Shanghai have a lot riding on how well Rousseff steers Latin America's biggest economy. With interest rates at all-time lows in much of the developed world, the 12 percent return on benchmark 10-year Brazilian government bonds has attracted money from all over. Foreign investors poured $15.9 billion into Brazil's stock market in the past two years. "The quest for yield and higher investment returns has flooded Brazil and other emerging markets with capital from around the world," says Russell Certo, a managing director at New York-based investment bank Gleacher & Co.

The capital inflows have buoyed Brazil's currency, the real, causing it to rise 34 percent against the dollar since late 2008. Finance Minister Guido Mantega, a holdover from the previous administration, has said he would consider a number of measures, including the imposition of new capital controls to fight the currency's appreciation, which puts Brazilian exporters at a disadvantage.

At the same time, Brazil's central bank is moving to curb the growth in consumer loans. The country has witnessed a fivefold expansion in consumer credit over the past eight years, with the total value of outstanding loans reaching $440 billion in October, according to central bank figures. This explosion was triggered in part by a 2001 regulatory change that allowed lenders to package auto, payroll, and other consumer loans into securities called FIDCs. The market for such notes has grown from nearly $290 million in 2003 to more than $35 billion last year.

Big Brazilian banks have stopped buying the credit portfolios since a November government probe into PanAmericano revealed losses stemming from improper accounting of sales of its loans. "PanAmericano was the wake-up call," says Denise Debiasi, the São Paulo -based managing director for Latin America at FTI Consulting (FCN), a Baltimore firm that advises on compliance, risk, and finance. "There's risks people may be overlooking—like credit quality—as the market booms." PanAmericano won't comment on the ongoing investigations, according to a spokesman at the bank's public relations firm.

To head off a subprime-style crisis, Brazilian authorities in December upped reserve requirements on time deposits held by banks to 20 percent from 15 percent. Banks must put aside more capital to back consumer loans whose terms exceed 24 months.

The government is also looking to regulate Brazil's credit-card industry. There are now 153.4 million credit cards in circulation in the country, triple the number from 2003. The average debt load of Brazilian consumers amounts to 18 percent of total disposable income, compared with 13 percent in the U.S., says Morgan Stanley (MS). In a Nov. 30 interview, Henrique Meirelles, who at the time was Brazil's central bank chief, indicated that a special task force would be convened to study the industry. "Some supervision could be proper," he said. "The case of PanAmericano showed how important this is."

The bottom line: The bailout of a Brazilian lender has exposed the need for greater supervision of the local consumer credit industry, which is growing rapidly.

Bovespa Retreats, Paring Weekly Gain, on Inflation, Bank Rout
January 07, 2011, 4:12 PM EST

Brazil's Bovespa stock index fell for a second day, trimming its weekly gain, as a report showed inflation last year quickened faster than forecast and banks tumbled for a second day.

B2W Cia. Global do Varejo, the nation's largest Internet retailer, fell as traders increased bets that policy makers will have to raise borrowing costs to slow inflation. Itausa - Investimentos Itau SA led a drop for financial shares on concern government measures to contain currency gains and restrict credit will hurt earnings.

"Rates will have to go up to maintain sustainable growth," said Roni Lacerda, who helps manage 2.8 billion reais ($1.6 billion) at Rio de Janeiro-based Mercatto Gestao de Recursos. "It'll be a volatile year because of valuations and problems in Europe and the U.S. recovery."

The Bovespa index slipped 0.7 percent to 70,057.20 at 3:15 p.m. in New York, trimming the weekly gain to 1.1 percent. Almost two stocks fell on the index for each that rose. The BM&FBovespa Small Cap index slipped 0.7 percent to 1,421.58, for a decline of 1.3 percent for the week, led by homebuilders on concern borrowing costs will increase. The real strengthened 0.2 percent to 1.6840 per U.S. dollar.

Consumer prices, as measured by the benchmark IPCA index, rose 0.63 percent in December, more than the 0.6 percent median forecast among 27 analysts surveyed by Bloomberg. Prices rose 5.91 percent last year, the fastest annual pace since 2004, the national statistics agency said.

B2W Varejo sank 1.2 percent to 32.00 reais. Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil's biggest publicly traded retailer, sank 2.8 percent to 66.66 reais.

Rate Futures

Traders raised bets for higher borrowing costs, pushing the yield on interest-rate futures contracts due in January 2012 up 9 basis points, or 0.09 percentage point, to 12.19 percent.

U.S. payrolls increased 103,000 in December, trailing the median forecast for 150,000 among economists surveyed by Bloomberg, Labor Department figures showed.

The MSCI Brazil/Financials Index fell 1.6 percent to 930.56 and is down 4.5 percent since Jan. 5, for the steepest two-day decline since Nov. 23. Itausa, the parent of the country's biggest bank, led declines, falling 2.9 percent to 12.87 reais.

Brazil's central bank yesterday set reserve requirements on short dollar positions held by local banks to stem the rally in the real. Last month, policy makers had raised reserve and capital requirements to slow consumer lending growth and inflation. Investors are concerned more measures are on the way, according to Otavio Vieira, who helps manage 1.5 billion reais at Safdie Private Banking in Sao Paulo.

Usinas Gains

The index's drop was limited as Usinas Siderurgicas de Minas Gerais SA advanced after Banco BTG Pactual SA recommended buying the shares, saying Brazil's steelmakers are "under- owned."

Usiminas fell 22 percent last year as steelmakers plunged on concern record imports of the metal and rising coal and iron ore costs will squeeze earnings. BTG Pactual analysts raised Usiminas to "buy" from "neutral," citing a potential decline in imports, improving domestic demand and global steel prices.

Usiminas gained 1.7 percent to 20.60 reais today.

"We believe sentiment should change for the better," analyst Edmo Chagas wrote in a note to clients. "We believe the Brazilian steel sector is still under-owned."

The Bovespa rose 1 percent in 2010 as concern Europe's debt crisis and rising borrowing costs in China will slow demand for exports offset speculation the fastest growth in two decades will bolster earnings. The gauge trades for 12.9 times analysts' 2011 earnings estimates, according to weekly data compiled by Bloomberg, compared with a ratio of 15.9 for the Shanghai Composite Index, 8.7 for Russia's Micex and 19.5 for India's Sensex.

Rousseff Is No Lula as Brazil Stock Index Slumps
January 04, 2011, 11:42 AM EST

Brazil's President-elect Dilma Rousseff, faced with the highest inflation in 23 months and a growing budget deficit, is failing to convince investors that she can match her mentor Luiz Inacio Lula da Silva's record for spurring economic growth.

The Bovespa index of most-traded stocks fell 2.4 percent since Rousseff was elected Brazil's first female president Oct. 31 through yesterday, as traders stepped up bets the central bank will raise interest rates next year to keep consumer prices in check. The index rose 0.5 percent today, bringing the gain for the year to 1 percent, its worst-ever annual performance when measured against the MSCI Emerging Markets index, which has risen 16 percent.

To meet her goal of lowering real interest rates that are the second-highest in the world after Croatia, Rousseff will have to contain federal spending that has risen 25 percent this year and helped the economy grow an estimated 7.3 percent, the most in two decades. She'll inherit from Lula the most overvalued currency in the world according to Goldman Sachs Group Inc., and a record current account gap of $49 billion.

"The easy job is over; the hard work is ahead," said Eric Conrads, who helps manage $12 billion in emerging-market stocks, including Brazil, at ING Investment Management in New York. "She has to strike a good balance between the strong currency, the fiscal situation and the current account deficit without killing the economy."

Containing Spending

Yields on interest-rate futures due in January 2014 have risen 54 basis points to 12.21 percent since her election and yesterday, as traders increase bets incoming central bank President Alexandre Tombini will have to raise borrowing costs from 10.75 percent in the absence of spending restraint. Inflation has been running above the government's 4.5 percent target all year.

Yields on interest rate futures maturing in January 2014 dropped 6 basis points to 12.15 percent today. The real climbed 1.1 percent to 1.6600 per dollar.

Rousseff takes office Jan. 1 in Brasilia.

The 63-year-old Rousseff, who served as Lula's cabinet chief, coasted to a runoff victory over Jose Serra by promising to maintain the policies of her former boss. Lula is leaving office with a record 87 percent approval rating.

Rousseff reappointed Finance Minister Guido Mantega, who under Lula oversaw record lending by the state development bank and a doubling of the fiscal deficit since 2008 to 2.74 percent of gross domestic product. Mantega pledged in a Nov. 30 interview to block new spending in a bid to open room for lower rates.

Lula's Turnaround

Brazilian stocks may continue to trail other emerging markets in early 2011, even as they remain attractively valued, until Rousseff takes "concrete actions" to reduce government spending, Goldman Sachs said in a Dec. 19 report.

"After the economic expansion we've seen, the government needs to be very decisive in controlling spending," said Eduardo Favrin, who oversees about $2.5 billion as head of equities for HSBC Global Asset Management's Brazil unit in Sao Paulo.

Rousseff's transition team did not return several phone calls and e-mails by Bloomberg seeking comment.

In the run-up to Lula's first electoral victory in 2002, the currency plummeted 61 percent, stocks fell 26 percent and Brazil's borrowing costs doubled on investor concerns the former union leader would default on the country's debt.

'Challenge of Abundance'

Once in office, he paid $15.5 billion in loans to the International Monetary Fund ahead of schedule and accumulated a record $287 billion in international reserves. The Bovespa averaged annual returns of 29 percent during Lula's first seven years in office.

Lula also gave the central bank, which lacks formal independence, a free hand to fight inflation. That's something Rousseff will have to repeat with the 47-year-old Tombini because policy makers in Brazil aren't appointed to set terms like their counterparts at the Federal Reserve, Bank of England or European Central Bank.

With Latin America's biggest economy stabilized, Rousseff will need to tackle longstanding obstacles to faster economic growth like excessive red tape, poor infrastructure and high taxes, said Christopher Garman, director for Latin America at the Washington-based Eurasia Group.

She also needs to improve education and health care to meet the demands of 36 million Brazilians that have joined the middle class under Lula, he said.

Cautious on Brazil

"Rousseff's success will depend on her capacity to deliver beyond keeping inflation under control," said Garman. "Brazil is facing the challenge of abundance -- it's not an easy agenda."

Urgent concerns include a currency that has strengthened 34 percent against the U.S. dollar since the start of 2009, the third-biggest gain among major currencies after the Australian dollar and South Africa's rand. The strong currency is fueling imports that will narrow Brazil's trade surplus next year to a nine-year low of $11 billion, the central bank estimates.

John Ditieri, who helps oversee about $13.5 billion in emerging-market equities at Arlington, Virginia-based Emerging Markets Management, says he's cautious on Brazil until its clear how Rousseff will respond to the competing "political pressures" of exporters, investors and lawmakers.

All Tools

"We just hope they attack things in a balanced and responsible way," says Ditieri. "They probably are going to have to use all the tools they have."

Rousseff, a former Marxist guerrilla who never ran for office before being elected president, will be helped by bigger support in Congress than Lula had. Her Workers' Party and coalition partners boosted to 49 from 43 Senators its majority in the 81-seat chamber. Its control of the lower house taking office Feb. 1 is likely to increase too.

Infrastructure spending to host the 2014 World Cup and 2016 Olympics, and the $108 billion state-controlled Petroleo Brasileiro SA plans to invest through 2014 developing mainly offshore oil finds, should secure up to 5 percent economic growth even if Rousseff fails to address Brazil's economic weaknesses, said Ricardo Hausmann, an economics professor at Harvard University in Cambridge, Massachusetts.

"That might feel like a great rate of growth given Brazil's history, but it's so far below what is achievable," said Hausmann, a former planning minister of Venezuela. "The tragedy of Brazil is that it wouldn't take that much for the country to aspire to 7 percent growth."

Rousseff Pledges to Guard Against Inflation in Brazil
January 03, 2011, 9:54 AM EST

Brazil's President Dilma Rousseff pledged to prevent the "plague" of inflation from undermining her plans to eradicate poverty in Latin America's biggest economy while fostering economic growth.

"To ensure the continuation of the current economic growth cycle we need to ensure stability, especially price stability," Rousseff said in her inaugural speech to Congress yesterday. "We won't allow under any hypothesis that this plague returns to eat away our economic tissue and hurt the poorest families."

Rousseff received the presidential sash from Luiz Inacio Lula da Silva, who exits as the most popular leader on record in Brazil after overseeing growth last year forecast to be the fastest since the mid-1980s. She vowed to contain spending and tackle obstacles to sustained growth such as a complex tax system.

Brazil's first female president said her "most obstinate fight" will be to eradicate poverty. She emphasized that only economic growth can generate the jobs necessary for coming generations and allow the country to overcome income inequality.

Some 70,000 Brazilians lined the streets of Brasilia to watch as Rousseff was driven from the Congress to the presidential palace. U.S. Secretary of State Hillary Clinton was followed by Venezuelan President Hugo Chavez in a line of foreign dignitaries who greeted Rousseff and Vice-President Michel Temer.

Key Posts

Rousseff met today in Brasilia with Spanish Prince Felipe, Uruguayan President Jose Mujica, South Korean Prime Minister Kim Hwang Sik, Portuguese Prime Minister Jose Socrates, Palestinian Authority President Mahmoud Abbas, Cuban First Vice President Jose Ramon Machado Ventura and former Japanese Prime Minister Taro Aso to discuss bilateral agendas.

With economists in key posts, Rousseff will give priority to modernizing the country's roads, ports and airports ahead of the 2014 World Cup and 2016 Olympics, said David Fleischer, a political analyst at the University of Brasilia. The government may raise tariffs and taxes on capital inflows as businesses struggle with a currency that has strengthened 39 percent against the U.S. dollar since the start of 2009, Fleischer said.

"We will act decisively in multilateral forums in defense of a healthy and balanced economic policy, protecting the country from unfair competition and from the indiscriminate flow of speculative capital," Rousseff said.

She also said measures to simplify the country's tax system can no longer be postponed.

Rousseff will implement a "fiscal adjustment" while preserving investments under the government's growth acceleration program, Paulo Bernardo, who will step in as communications minister after serving as budget minister under Lula, said to reporters yesterday.

Rousseff inherits from Lula inflation running at an annual pace of 5.79 percent. That's less than the 17.2 percent Lula faced his first year in office, though still the fastest in 23 months. Inflation will remain above the government's 4.5 percent target through the end of 2011, according to a central bank survey of economists published Dec. 27.

Higher Rates

Traders are betting incoming central bank President Alexandre Tombini will begin raising the overnight Selic rate 50 basis points to 11.25 percent at the bank's Jan. 18-19 meeting, according to Bloomberg estimates based on interest rate futures contracts. Brazil's rates are the second-highest in the Group of 20 nations after Argentina.

Rousseff, who served as Lula's cabinet chief and energy minister, had never run for public office before entering the presidential race. With her former boss's endorsement, she won 56 percent of the votes in an Oct. 31 runoff against Jose Serra, a former governor of Sao Paulo state.

Dozens of dignitaries attended the ceremony, including Bulgaria's Prime Minister Boiko Borissov. Rousseff's father immigrated to Brazil from the Eastern European nation in the 1940s.

Rousseff also invited 11 women with whom she shared a prison cell after being arrested in 1970 for fighting Brazil's military dictatorship as a member of the underground VAR Palmares group.

Prison Years

After three years in prison, where she was tortured, Rousseff studied economics and settled in the state of Rio Grande do Sul with her second husband, Carlos Araujo, an underground leader. They separated in 1994.

Rousseff joined Lula's Workers' Party before his 2002 election. After serving as energy minister, she replaced longtime Lula ally Jose Dirceu as Cabinet chief in 2005, when he and several party stalwarts resigned over allegations they knew about payments made to lawmakers in exchange for votes.

Her candidacy was put in doubt when she announced in April 2009 that she was being treated for lymphoma. Five months later, her doctors pronounced her in "excellent health."

High Expectations

Brazilians have high expectations for Rousseff. Her government will be as good, or better, than Lula's according to 83 percent of those surveyed in a Datafolha poll published Dec. 22.

Lula, who is banned by the constitution from seeking a third consecutive term, leaves office with a record 83 percent approval rating, the same survey showed, after he helped lift 21 million people from poverty and cut unemployment in November to a record low 5.7 percent.

Investors are more cautious. The Bovespa index of most- traded stocks has fallen 1.9 percent since Rousseff's election, reducing last year's gains to 1 percent compared with average annual returns of 29 percent during Lula's first seven years in office. Last year's performance was the worst-ever when measured against the MSCI Emerging Markets index, which rose 17 percent.

Yields on interest-rate futures contracts have also risen, as investors step up bets she'll fail to contain spending that rose 25 percent last year and helped the economy grow 7.3 percent, according to central bank estimates.

Overvalued Currency

The higher rates are attracting capital that has made the real the most overvalued currency in the world according to Goldman Sachs Group Inc. Under Lula the currency more than doubled in value to 1.66 per U.S. dollar from 3.54.

Economists expect foreign investment to develop deep-water oil discoveries by state-controlled Petroleo Brasileiro SA to bolster the currency.

Finance Minister Guido Mantega, one of 13 Lula ministers who will also serve in Rousseff's cabinet, tripled to 6 percent in October a tax on capital inflows in a bid to stem the rally. Rousseff will probably take measures to contain gains in the real, Mantega said Dec. 30.

Petrobras Jumps to Six-Week High on Record Brazilian Production
December 29, 2010, 5:56 AM EST

Petroleo Brasileiro SA, Brazil's state-controlled oil company, advanced to a six-week high after the country's oil output climbed to a record in November and crude traded near a two-year high.

Petrobras jumped 1.7 percent to 26.49 reais at 10:11 a.m. in New York, the biggest gain in more than a week. OGX Petroleo e Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, jumped 2.3 percent to 19.48 reais, the biggest gain since Dec. 1. The Bovespa stock index climbed 0.1 percent.

"Petrobras' production release was strong," said Diana Litewski, an equity analyst at Oren Investimentos in Rio de Janeiro, which manages 290 million reais ($172 million). For OGX, "elevated oil prices and positive news flow may be a new trigger for the stock."

Brazil's production of oil rose to a record 2.089 million barrels a day last month, the agency known as ANP said on its website yesterday. Petrobras' total November oil and gas production was 2.6 million barrels a day, of which 2.03 million barrels was in Brazil, according to an e-mailed statement.

Crude for February delivery gained 46 cents, or 0.5 percent, to $91.46 a barrel on the New York Mercantile Exchange. It touched $91.67, 21 cents below the two-year intraday high of $91.88 reached yesterday. Futures have advanced 15 percent this year.

Separately, Brazil found more evidence of oil at the government's Libra offshore field, which may be the largest oil discovery in the Americas in more than three decades.

ANP found a second layer of hydrocarbons at Libra, according to records on its website dated Dec. 27. The regulator first reported oil at the field in late October.

Libra is estimated to hold as much as 15 billion barrels of recoverable oil, which would eclipse Brazil's total current reserve base and make it the biggest find in the Americas since Mexico discovered Cantarell in 1976.

BVSP (Brazilian Bovespa Stock Index)

Brazil...
The Bovespa Index is headed for a test of 73000. Breakout would signal an advance to 79000*. Rising Twiggs Money Flow (13-week) indicates buying pressure.

* Target calculation: 73000 + ( 73000 - 670000 ) = 79000

Tks for updating - I'm currently invested in EWZ and trading in about three day cycle
LBJ.

Cheers & GLTA

EMERGING MARKETS SHOWING WEAKNESS...
While the US markets power towards higher highs ? although in a weak manner we might add, we've begun to see outflows of funds from the Emerging Markets. Ostensibly, this is due in large part to the Egypt uprising, but there are other issues the emerging markets are facing such rising inflationary pressures and rising food prices. Many believe these circumstances to be transitory, but perhaps they shall be with us longer than anyone anticipates, and the impact upon the emerging market stock markets should not be dismissed so easily.

To this end, we find it instructive to look at the monthly charts of various emerging markets, and Brazil in particular. What we see is that the rally off the 2009 low is rather sharp at over 100%, and we find that Brazil's BOVESPA follows its 16-month moving average rather nicely. What concerns, is that prices have now broken through sufficiently to call this a new bear market, but we need to see whether prices shall remain below it and close below it by month's end. If not, then it shall prove support and new highs would be forthcoming. But when one looks at the 5-month RSI divergence, then one gets the sense prices are indeed going into a bear market.
Therefore, if a bear market is indeed underway, then we would be naive to believe that the US can escape significant weakness in the face of emerging market weakness since it was the emerging markets that led the US out of its bear market.

Good luck and good trading!

BVSP (Brazilian Bovespa Stock Index) INDX...

The Bovespa Index below 67000 indicates a primary reversal. Twiggs Money Flow (13-week) below zero confirms the signal. Expect a test of the 2010 low at 60000.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index) INDX...

The Bovespa Index is retracing to test resistance at 67000, but remains in a primary down-trend. Twiggs Money Flow (13-week) recovery above zero would weaken the signal. Target for the decline is 62000*.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index) INDX...
The Bovespa Index remains in a primary down-trend, but recovery above 67000 and bullish divergence on Twiggs Money Flow (21-day) suggest that a bottom is forming.

* Target calculation: 67000 + ( 72000 - 67000 ) = 62000

BVSP (Brazilian Bovespa Stock Index)...
The Bovespa Index is in a primary down-trend, but Twiggs Money Flow (21-day) oscillating around zero signals uncertainty. Follow-through below 67000 would indicate another test of primary support at 64000; failure offering a target of 60000*.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

BVSP (Brazilian Bovespa Stock Index)...
The Bovespa Index is in a primary down-trend, but bullish divergence on 21-day Twiggs Money Flow indicates buying pressure, suggesting that the down-trend is likely to be short-lived. Reversal below 67000 would indicate another test of primary support at 64000; and failure would offer a target of 60000*.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

Brazil: Bovespa...
The Bovespa Index ranging between 66000 and 68000 is a bullish sign. Upward breakout would signal another test of 72000, while failure of support would test primary support at 64000. Rising 13-week Twiggs Money Flow indicates strong buying pressure, favoring an upward breakout.

* Target calculation: 64000 - ( 68000 - 64000 ) = 60000

Let's see how this story pans out...

10 Brazilian Stocks With Upside
06/16/11 - 02:56 PM EDT

1. Petroleo Brasileiro (PBR)
2. Embraer (ERJ)
3. Gol Linhas Aereas Inteligentes (GOL)
4. Gerdau (GGB)
5. Companhia Siderurgica Nacional (SID)
6. Banco Bradesco (BBD)
7. Companhia Energetica de Minas Gerais (CEMIG)
8. Itau Unibanco Holding (ITUB)
9. Banco Santander Brasil (BSBR)
10. Vale (VALE)

Have an upside potential of up to 60%, based on analysts' consensus estimates of 12-month price targets.

Brazilian stocks plunged to their lowest levels in the past year. Brazil's Bovespa has shed around 8% during the last six months. Brazil's inflation rose to 6.55%, topping the central bank's annual upper limit of 6.5% for the second straight month. The central bank raised the benchmark Selic rate by 25 basis points (bps) to 12.25 % on June 8; overall Selic was raised by 1.5% year-to-date.
We have identified 10 stocks across sectors like banking, commodities and airlines, which investors can consider for long-term growth. The selected stocks have an average market capitalization of $64 billion, delivered average gains of 5%, compared to Bovespa's negative 5% during the past year. These stocks could generate 40% gains during 2011, according to analysts' consensus estimates with a mean buy rating of 65%.

Embraer (ERJ) manufactures commercial and defense aircraft with the defense business contributing around 10% toward revenues.
First-quarter revenue stood at around $1.06 billion when compared to $992 million in the first 2010 quarter. Gross margins stood at 24.3%, up 2.2% from 2010 March quarter. Higher margins resulted from better product mix and efforts to maximize operational efficiency.
Net income jumped 105 million in the quarter compared to 24 million in the prior year quarter. Cash position improved to $505 million from $440 million in the first quarter of 2010
Management indicated an order backlog of $16 billion at the end of March, up $ 400 million at the end of 2010, representing approximately three times 2011 revenue guidance. The stock is trading at 15.3 times its estimated 2011 earnings.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50574)

Banco Bradesco (BBD) is a private sector commercial bank and among the top five banks in Brazil, in terms of assets.
The stock has gained 24% during the past year and 55% of analysts covering it rate it a buy.
Total loan growth grew 22% year-over-year, as corporate and auto loans, accounting for two-thirds of total loans, were robust. Corporate loans expanded 26%, while personal loans were lower at 16.4%.
Improved asset quality is a positive. The bank's non-performing loans improved 4.4% compared to 5.3% in the same period last year. Provision coverage stands at 159%, up from 151% in the June quarter of 2010.
Capital adequacy ratio was 15%. Banco expects its loan book to grow at 15% to 19% for 2011, backed by higher demand from small and medium enterprises (SMEs). The stock is trading at 11.1 times its 2011 earnings.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50575)

Itau Unibanco Holding (ITUB) is one of the largest private banks in Brazil.
During the first quarter, Itau's buoyant credit growth boosted net income to $2.25 billion, up 9.3% year-over-year. However, profits declined as provisions grew 15% compared to the same period last year.
Total loans expanded 22%, higher than the Brazilian central bank's mandated range of 10% to 15% through March. Nevertheless, credit growth could be slower on interest rate hikes and the central bank's monetary curbs.
Non-performing loans were flat quarter-on-quarter at 4.2% nevertheless, some deterioration was observed from smaller companies during the quarter.
The bank's return on equity stood at around 22.7%. The stock is trading at 11 times its estimated 2011 earnings with an upside potential of 33% in the next one year. Of the 12 analysts covering the stock, 10 rate it a buy, as per a Bloomberg consensus.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50576)

Banco Santander Brasil (BSBR) is a Brazilian full-service bank having the fourth-largest asset base in the country. The bank operates in three business segments: commercial banking, wholesale banking, and asset management.
Lower loan loss provisions boosted net income to 18% during 2011 first quarter. Aided by individual loans and SMEs, the bank's loan portfolio grew at a robust 17.6% year-over-year at the end of March. Nearly 50% of the bank's lending supports the retail segment. Net interest income was up 11.5% over the same period in 2010.
Non-performing loans dipped 6.4% during the March quarter, narrowing 140 basis points year-over-year. The coverage ratio is comfortable at 98.1%.
BSBR's return on equity improved to 11.7% during the latest first quarter, compared to 10.5% in the same period last year. Return on assets stood at 2.2% during the quarter, flat versus the first quarter of 2010. Analysts expect the stock to deliver an upside of 34% with buy ratings of 55%. The stock is trading at 10.4 times its 2011 earnings.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50577)

Vale (VALE) is a metals and mining giant producing iron ore and iron ore pellets.
During the first quarter of 2011, the company reported operating revenue of $13.5 billion, increasing 98% year-over-year, while operating income and net profit surged over 250% each to $8 billion and $6.8 billion, respectively. Operating margin increased to 48.9% from 31.2% in the prior year's March quarter.
The proportion of bulk material sales, comprising of iron ore, pellets, manganese ore, ferroalloy, and metallurgical and thermal coal represented 70.3% of the first quarter operating revenues, in line with 71.5% realized during the fourth quarter of 2010. Sales to Asia contributed 49.6% toward total first-quarter revenue, down from 54.5% in the fourth quarter of 2010.
The stock has analysts' buy rating of 84% and an upside potential of 41% over the next one year. Vale is currently trading at 5.9 times its estimated 2012 earnings.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50578)

Gerdau (GGB) is an integrated steel player operating in Brazil, North America and Latin America.
On average, analysts expect the company to deliver net profit growth of around 10% in 2011, riding on the back of improving fundamentals.
Net revenue increased 18% year-over-year during the latest first quarter, backed by improved sales. However, higher production costs dented profitability year-over-year, while margins increased sequentially. Gross margin stood at 13.9% and EBITDA margin increased to 13.2% for the quarter.
To consolidate its growth plans, Gerdau recently announced the acquisition of Acos Villares, a company engaged in the production of long steel. The proportion of North American sales increased to 35% in overall sales during the quarter, while domestic sales declined.
The stock is trading at 13.5 times its 2011 earnings and analysts expect an upside of 42%, with a buy rating of 56%.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50579)

Companhia Energetica de Minas Gerais (CEMIG)(CIG) engages in electricity generation, transmission and distribution. Operating through its subsidiaries Gasmig and Infovias, the company distributes natural gas and is a telecommunications service provider.
CEMIG's power plants have total installed capacity of around 7,000MW --making it one of Brazil's top electricity generators. In distribution, CEMIG operates the largest electricity distribution network in the region, spanning across 300,000 miles.
During 2011 first quarter, sales were 17,981 gigawatt hours, up 16% from the year-ago period. Net revenue and EBITDA for the first quarter rose 18% and 11%, respectively. Higher operational efficiency improved EBITDA margins. The stock has gained around 38% in the last one-year and is currently trading at 9.9 times its estimated 2011 earnings.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50580)

Petroleo Brasileiro (PBR) is an integrated Brazilian oil and gas company operating in segments like exploration and production, refining, transportation, and marketing of gas and power.
Higher crude oil prices and volumes during the year buoyed the company's exploration and production segments, while downstream was negatively affected. For the first quarter of 2011, net income increased 42%, boosted by a 7% uptick in domestic sales, led by jet fuel, natural gas, and diesel.
Petrobras' estimated oil reserves stand at about 11 billion to 12 billion barrels of oil equivalent (boe) with a production output of more than 2 million boe per day. The recent acquisition of Libra oil field in the Santos Basin would sustain a higher replacement ratio of 144%, in comparison to peers.
Exploration and production capex stood at $9.2 billion for the quarter, primarily expanding oil and natural gas capacity in the pre-salt areas.
The stock is currently trading at 9.6 times its estimated 2011 earnings. Going forward, on average, analysts expect the stock to deliver 47% during the next one year.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50581)

Companhia Siderurgica Nacional (SID) is an integrated steel producer in Brazil with interests in mining and logistics.
The company's efficient cost-containment strategy and lower selling and administrative expenses improved operating margins. EBITDA margin stood at 40% during the first quarter of 2011, while net margin escalated 16% from 14% in the first quarter of 2010.
Net sales for the first quarter grew 19%, due to higher iron ore prices and sales volume. Exports grew faster than domestic sales. Net income was up 37% for the quarter on improved operating performance from its steel and mining segments and lower operating expenses.
The stock is trading at 8.8 times its estimated 2011 earnings. Analysts estimate an upside of 51% in the next one year
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50582)

Gol Linhas Aereas Inteligentes (GOL) is a budget airline operating in Brazil and on routes to South America and the Caribbean.
Net revenue came in at around $1.2 billion, up 10% year-over-year. The company's yield was flat year-over-year, although declining 2.9% sequentially, while load factor increased to 72.3% from 70.2% in the same quarter of the prior year. Domestic load factor increased 73.5%, while international market demand grew at a robust 16% year-on-year.
Higher wages and fuel costs saw operating costs edge up 11% during the quarter. Net income, excluding forex gains, rose 34% during the quarter. The company closed the quarter with an operational fleet of 111 B737-700, 800 NG aircraft and a total fleet of 125 aircraft, identical to the December quarter.
However, firm crude oil prices could damp margins, going ahead. The stock is trading at 14.3 times its estimated 2011 earnings with an upside of 60%.
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=50583)

UPDATE 1-Brazil's Gerdau mulls $240 mln Chile investment
Tue Aug 16, 2011

* Company studying investing around $240 million in Chile * Looks to boost output capacity and steel production * Steel production capacity could rise to 800,000 tonnes
(Adds production details, CEO quote, background) By Felipe Iturrieta and Antonio de la Jara SANTIAGO, Aug 16 (Reuters) - Brazilian steelmaker Gerdau
(GGBR4.SA)(GGB.N) said on Tuesday it was studying investing
around $240 million in Chile to boost output capacity and steel
production. The Porto Alegre, Brazil-based company, the world's
second-biggest maker of steel products for the construction
industry, was looking to invest in raising its steel ingot
production capacity and in a rolled-steel plant, said Hermann
von Muhlenbrock, chief executive of Gerdau's Chilean unit. "This project was ready in 2008, but the (global economic)
crisis delayed it," von Muhlenbrock said. "Now the situation
has normalized. So we've reactivated it." The project, planned for 2012-2015, must be approved by
Gerdau's executive board at the end of the year to begin
implementation in January 2012, von Muhlenbrock said. The company's investment will focus primarily on replacing
its 60-tonne-capacity furnace with a 90-tonne one, which could
increase annual steel production capacity to 800,000 tonnes
from the current 520,000. Additionally, the company plans to construct a rolled-steel
plant with an annual production capacity of 400,000 tonnes. The company already has a rolled-steel plant on the
outskirts of Santiago with a 370,000-tonne annual production
capacity and another plant with a 100,000-tonne annual
production capacity. Gerdau is pushing forward with investments in Chile and the
United States as conditions in Brazil remain challenging. The South American giant's surging currency has exacerbated
rising wages and other costs for Brazilian steel mills, whose
profit margins are evaporating. [ID:nN1E7791G9] The company is diversifying away from its core long steel
focus and plans to enter flat products. Gerdau this month posted a quarterly profit of $320
million, down 41 percent from the same period last year, with
rising raw materials and wage costs weighing on mill
operations. [ID:nN1E7730BY] Gerdau's main sector competitor in Chile is local
steelmaker CAP (CAP.SN).

UPDATE 1-Bunge $2.5 bln Brazil investment to raise crush

Thu Aug 18, 2011 6:07pm EDT

* Brazil ethanol sector has been investment target

* Investment will focus on bioenergy, mainly ethanol (Adds details, quote, context)

SAO PAULO Aug 18 (Reuters) - Bunge (BG.N) will invest $2.5 billion to boost its sugar and bioenergy capacity in Brazil through 2016, the company said in a statement on Thursday.

The investments will go into eight of the group's mills and will expand crushing capacity by 50 percent from present levels to 30 million tonnes a year of cane.

The investment "will be primarily focused on the bioenergy sector, mainly ethanol," said Adalgiso Telles, Bunge's director of corporate affairs.

Telles spoke before a meeting ended between Brazil's president, Dilma Rousseff, Energy Minister Edison Lobao and Bunge executives.

Brazil's government has been concerned over the failure of the cane sector to meet growing domestic demand for ethanol.

Bad weather and a lack of investment have hit the country's cane output, leading to the first fall in a decade this season.

Demand for ethanol has outpaced production as a growing middle class buys more flex fuel cars. The jump in ethanol prices earlier this year saw many car owners opting instead for gasoline -- leaving state-controlled energy giant Petrobras (PETR4.SA) scrambling to buy gasoline abroad at a loss due to government caps on local fuel prices.

Bunge's investment follows an announcement in the previous day that Petrobras and sugar and ethanol group Sao Martinho SMT03.SA will invest 520.7 million reais ($326 million) to quadruple ethanol output at their joint Boa Vista mill. [ID:nN1E77G227]

Brazil's ethanol and sugar industry has been a target for acquisitions for several oil giants over the last few years, including BP (BP.L). Royal Dutch Shell (RDSa.L) has also teamed with sugar and ethanol group Cosan (CZZ.N).

($1=1.5980 reais)