Brazil Stocks, Real Rally After Rio Wins 2016 Olympics Bid
Oct. 2 (Bloomberg) -- Brazilian stocks rallied, making the Bovespa the world’s best-performing major index today, and the currency gained after Rio de Janeiro was awarded the 2016 Summer Olympic Games, luring investment to the country.
The Bovespa climbed 0.8 percent to 60,944.33 at 1:08 p.m. New York time, led by airlines Tam SA and Gol Linhas Aereas Inteligentes SA. The real, the best-performing emerging-market currency against the dollar this year, rose 0.5 percent to 1.7778. Yields on interest-rate futures contracts declined.
“People are obviously happy, so they’re buying stocks,” said Nick Field, who helps manage about $11 billion in emerging market stocks at Schroeders Plc., in a telephone interview from London. “The fact that Brazilian stocks are doing something different than everybody else today has more to do” with winning the Olympics bid.
Rio, which is hosting the World Soccer Cup in 2014, beat Madrid, Chicago and Tokyo to become the first city in South America to host the 2016 Summer games.
The games will help sustain Brazil’s economic growth by injecting $51.1 billion into Latin America’s largest economy through 2027 and add 120,000 jobs annually through 2016, according to studies by a Sao Paulo business school for the Ministry of Sports. Brazil plans $11 billion of investments as host, more than any other of the bidding cities.
“Real estate is going to boom; they’re going to have to construct a huge amount of hotels and roads,” said Patrick Carvalho, an economist at the Rio de Janeiro association of industries. “The Olympics isn’t just 2016, there’s going to be marketing until 2016, so Brazil will have the flashlight. The purchasing power of the population will rise and tourism will get a huge boost.”
Airlines, Steelmakers Gain
Gerdau SA, Latin America’s largest steelmaker, jumped 3.8 percent to 23.98 reais today. Tam, Brazil’s biggest airline, climbed 4.4 percent to 24 reais. Gol, the second-biggest, rose 3 percent to 18.35 reais.
The winning bidder may also get a stock-market boost, an economist at Germany’s ZEW institute said Sept. 30.
“Winning the Olympics bid, after having the rights to host to 2014 World Soccer Cup, will definitely increase the chances of more investments to Brazil,” said Adilson Goes, currency director at Fair Corretora, in a telephone interview from Sao Paulo. “Market sentiment turned positive.”
Brazil’s victory also comes after Moody’s Investors Service boosted the nation’s rating to Baa3, the lowest investment- grade, on Sept. 22, one year after the global credit crisis.
The nation’s gross domestic product grew more than analysts forecast in the second quarter, signaling the economy is recovering from the global recession faster than other developing countries.
The Bovespa has gained 62 percent this year, compared with a 19 percent rise in the MSCI World Index of 23 developed countries. The index rose 1.2 percent today.
Hotels Gain
Hoteis Othon SA, which operates hotels in Brazil, more than doubled to 80 centavos from 36 centavos yesterday.
“The big beneficiaries will always be hotels,” said Bill Rudman, who helps manage $1.5 billion in emerging-market stocks at Blackfriars Asset Management, in a telephone interview from London.
Vale SA and Petroleo Brasileiro SA, Brazil’s two biggest commodity producers, may benefit from increased infrastructure spending, said Richard Kang, chief investment officer at Emerging Global Advisor.
“The infrastructure will be gigantic,” Kang said in a phone interview from New York. “Luckily for Brazil they have all the commodities to deal with massive infrastructure projects.”
Real Outlook
The real is poised to gain for a fifth straight week, its longest winning streak since the period ended May 2, 2008. It has gained 30 percent in 2009.
The yield on Brazil’s zero-coupon, real-denominated bond due in January 2011 fell for the first time in three days, dropping five basis points, or 0.05 percentage point, to 10.31 percent today.
Rio, in a metropolitan area with 12 million people, centered its bid on using sports as a catalyst for social integration, celebration and transformation of the city, the region and the country. The city promised “impeccable games” that will improve the city’s infrastructure, security and environment, and generate 50,000 temporary jobs and 15,000 permanent ones.
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