Sun, Nov 30, 2003 - Page 11 News List

Brazil's benchmark hits record high; up 97% in 12 months


Brazil's benchmark stock index closed above 20,000 points Friday for the first time as investors bet on an accelerating economic recovery.

Sao Paulo's Bovespa index closed the day at 20,183 points, after Thursday's close of 19.960.

The index was up 79 percent this year and 97 percent in the past 12 months.

The upward trend at South America's biggest stock exchange accelerated as investors hoped a still timid economic recovery in Brazil will speed up, spurred by continuing interest rate cuts, economists said.

Brazil's central bank has cut its benchmark interest rate by nine percentage points this year to 17.5 percent, and analysts expect a further cut of up to 1.5 percentage points in December.

The lower rates have so far been slow to boost the economy. The government on Wednesday published a meager third quarter growth figure of 0.4 percent from the previous quarter.

"It takes a while until the interest rate cuts trigger down. First, the capital goods industry is reacting and only then overall growth will pick up," said Hugo Penteado, chief economist at ABN Amro in Sao Paulo.

An expected acceleration of economic growth will help the Bovespa gain up to another 30 percent in the coming months, the bank predicted.

Penteado reckons Brazil's economy will expand only by 0.5 percent for the full year, but expects growth to be 3.8 percent next year. Other economists also expect a 3.5 to 4 percent growth rate for next year.

The government hopes the recovery will gain speed rather sooner than later. President Luiz Inacio Lula da Silva was elected last year on a platform of sustained growth and jobs for millions of Brazilians. Earlier this year, he promised that a "spectacle of growth" was soon to start.

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