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Brazil stocks end up on expected U.S. rate hike

SAO PAULO: Brazilian stocks ended firmer Wednesday after the U.S. Federal Reserve raised its key interest rate by an expected 25 basis points, opening up room for buying in promising local issues, traders said.

The Sao Paulo Stock Exchange's leading Bovespa index .BVSP ended up 2.1 percent at 16,868 points, a hair's breadth below the day's high of 16,874.6, which was reached shortly after the Fed raised the federal funds rate to 5.75 percent.

"The rate hike itself was in line with expectations, though the text warning inflation was a bit worrying," said Gabriel Jafet, fund manager at Oryx Asset Management.

Markets in Brazil were depressed in recent sessions ahead of the Fed's decision, as investors fretted higher U.S. interest rates would slow down foreign investment flowing into emerging markets.

Jafet said relief over Fed's moderate credit tightening Wednesday led to buying in selective Brazilian companies, especially those backed by positive earnings outlooks.

Fixed-line telephone company Tele Norte Leste and Brazil's No.1 private bank Bradesco, for example, rose 2.6 percent and 2 percent respectively.

Tele Norte Leste said it was stepping up investments this year by 20 percent to 2.9 billion reais ($1.6 billion) to modernise Rio de Janeiro's faulty telephone system.

Bradesco is expected to boost income from credit lending for this year after the currency devaluation forced it to beef up loan-loss provisions and cut into profits last year.

Cable TV operator Globocabo once again outpaced market gains, jumping 6 percent to 4.09 reais after options on its American Depositary Receipts (ADRs) were listed in Chicago Wednesday.

The company has been attracting buyers due to its Internet-linked growth prospectives. Globocabo's debentures also began trading on Brazil's over-the-counter market Soma on Wednesday.

Leading the losers Wednesday was giant beverage company Brahma, which plummeted more than 9 percent to 1127 reais after restrictions were recommended for its proposed merger with rival brewer Antarctica.

The Justice Ministry on Monday recommended that the merged company, AmBev sell one of their beer brands and factories for the union to proceed, but AmBev shot back Tuesday saying it will not drop any of its brands.

Brahma was trading at 999 reais on June 30, just before the announcement of the merger. AmBev was not traded Wednesday.

The Bovespa index was down 1.3 percent so far this year by Wednesday's close while it was up 3 percent in the month. Turnover was a slow 845 million reais Wednesday, compared with daily average trading of 1.05 billion reais in January. -Reuters