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Brazil shares slump, led by bank, telecoms stocks

SAO PAULO: Brazilian shares ended 2.4 percent lower on Wednesday, as profit-takers pulled down telephone stocks and banking issues fell amid concern about stepped-up competition after Spain's BSCH bank said it would buy the Meridional financial group, traders said.

Sao Paulo's benchmark Bovespa index ended down at 17,470 points, dropping for the second day along with Wall Street, where blue-chip stocks were modestly lower in afternoon trading.

The two largest Brazilian banks owned by private interests -- Itau and Bradesco -- suffered bigger losses than the broader market.

"After the purchase today, Itau and Bradesco are looking at more competition," said Roberto Dotta Filho, a fund manager at Tudor Asset Management.

Earlier, BSCH, Spain's biggest bank, said it would buy Brazil's Meridional group -- which includes Meridional retail bank and Banco Bozano Simonsen investment bank -- aiming to consolidate its role as Latin America's top foreign bank.

Itau closed down 3.5 percent at 152 reais and Bradesco ended off 4.9 percent at 15.60 reais. Deutsche Bank Alex. Brown earlier said it was lowering its rating on the stock to "buy" from "strong buy."

Telephone issues such as Tele Norte Leste also extended losses. Last week the sector surged amid moves by Spain's Telefonica to buy all outstanding shares in two Brazilian phone units as part of a share swap plan.

"The tendency is for profit-taking ... as telecoms settle back to their just price considering the short-term macroeconomic limitations in the country," Dotta Filho said. "In the medium term, they could recover."

Tele Norte Leste closed down 8.7 percent at 47.30 reais while Tele Centro Sul ended off 4.3 percent at 33.50 reais. Telebras preferred receipts fell 4.2 percent to close at 246.80 reais.

Still, the session brought gains for a handful of second-tier stocks such as steelmaker Acesita, which missed out on the Bovespa's latest surge. Acesita ended up 5.9 percent at 1.44 reais.

"There is room for a rally in the second tier since they are so far behind the blue chips," one local trader said.

Trading was moderate at 975 million reais, led mostly by local buying, traders said. That compares with daily average volume of 980 million reais in December.

The Bovespa has risen 2.2 percent so far in January.-Reuters