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Brazilian stocks retreat after six days of gains

SAO PAULO: Brazilian share prices retreated from record highs on Wednesday as a decline on Wall Street encouraged an end to the local market's six-day advance amid a mixed performance by telecom issues, traders said.

The Sao Paulo Stock Exchange's Bovespa index of leading shares dropped 1.7 percent to close at 18,361 points.

Even with the drop, the Bovespa boasts some of the biggest gains among world stock markets with a rise of 7.4 percent since Jan. 1 and a 12 percent increase so far in February.

"We are still very much on an upward trend, but I think it is good that we did some profit-taking today," said Julio Mora, head trader at Fator, Doria Atherino in Sao Paulo.

Brazil's market has benefited from an improved economic outlook, reflecting low inflation, reduced interest rates and a return to growth.

Telecommunication stock was still cornering market attention and blue-chip Telesp was still flying high even though the broad market folded back.

Telesp advanced 1.7 percent to 60.80 reais after reporting overnight a 9 percent rise in net profit and 18 percent gain in sales for 1999.

Traders said the stellar stock performance of its majority shareholder Telefonica de Espana might have been even more important to Telesp's good performance. Telesp shareholders will soon become Telefonica holders if they accept the Spanish group's buyout offer.

As many European telecoms stocks surged Wednesday, Telefonica reached fresh highs with a gain of more than 7 percent in Madrid, though its rise was cut to 4.6 percent by the close.

Another big attention grabber was Tele Centro Sul after itsaid it would simplify its structure by grouping all of its phone operators under a single subsidiary, Telepar.

Tele Centro Sul ended 3 percent lower at 29.95 reais after gaining more than 10 percent in the previous two sessions while rumours of the restructuring swirled, traders said.

Long-distance operator Embratel buckled 3 percent to 49.01 percent despite an earnings report for 1999 showing a 93 percent increase in profit.

Outside the telecom world, Cemig, an electric utility in Minas Gerais state, extended gains it struck since the state's ousting of minority shareholders from Cemig in December, which has made the stock look very cheap, traders said. Cemig tacked on 1.7 percent to 33.25 reais and accounted for 6.4 percent of total volume.

Total turnover on Wednesday reached 1.1 billion reais ($625 million), down from Tuesday's 1.3 billion reais ($739 million).-Reuters