Brazil Stocks Climb as Commodity Producers Offset Consumer Slump

(Bloomberg) -- The Ibovespa rose toward to four-year high as commodity producers advanced, outweighing disappointing reports at companies that depend on domestic demand.

Paper exporter Klabin SA rose after earnings beat analysts’ estimates in the three months through September. Steelmakers Cia. Siderurgica Nacional SA and Metalurgica Gerdau SA gained as metals advanced. Cosmetics maker Natura Cosmeticos SA slumped after profit trailed forecasts by almost 50 percent amid Brazil’s worst recession in a century.

As the Brazilian government struggles to shore up public finances and restore growth, companies that sell raw materials have benefited from a recovery in oil and metal prices. Accounting for 26 percent of the Ibovespa’s weighting, commodity producers will support the stock market while the local economy remains weak, according to Raphael Figueredo, an analyst at the brokerage Clear Corretora in Sao Paulo.

"Considering the prospects for commodity prices, the Ibovespa has room to continue rising,” Figueredo said. “We’ve seen investors from all over the world flocking to our stocks market."

Foreign investors have bought a net 3.4 billion reais ($1.1 billion) in Brazilian stocks this month through Oct. 25, according to data from the exchange. It’s the first time since July that purchases have exceeded sales by overseas investors.

The Ibovespa added 0.7 percent to 64,249.50 at the close of trading in Sao Paulo as 37 of its 58 stocks advanced.

* Klabin climbed 2.2 percent, the most in three weeks
* CSN added 2.4 percent, Metalurgica Gerdau rose 1.8 percent

Natura lost 4.1 percent, one of the worst performers on the gauge, after the earnings report dealt a further blow to investors following the surprise resignation of its chief executive officer this week. The results were “remarkably weak,” and “driven by markedly high volume decline in Brazil, sales rep erosion and channel productivity decay,” Banco Itau BBA SA analyst Thiago Macruz wrote in a report to clients.

Brazilian stocks have rallied 86 percent this year in dollar terms, the best performance in the world, on optimism that President Michel Temer will succeed in his recovery plan. Gross domestic product is projected to contract 3.22 percent this year after shrinking 3.8 percent in 2015, according to a weekly survey by the central bank.

To contact the reporters on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net, Marisa Castellani in Sao Paulo at mcastellani7@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Sebastian Boyd, Ney Hayashi