Brazilian Stocks Rally Most This Month Led by Cesp Banks

The Bovespa index gained the most this month as utilities, banks and retailers rallied on speculation Brazil may win an investment-grade rating from Fitch Ratings and Cia. Energetica de Sao Paulo jumped on a report the government may sell its stake in the electric company.

Cesp, as the utility is known, rose the most in five months on an Estado de S. Paulo newspaper report Sao Paulo state may win federal backing to renew electricity licenses, paving the way for the sale of its controlling stake. Banco do Brasil SA, Latin America's biggest bank, climbed the most in a month after Banco Santander SA and Goldman Sachs Group Inc. recommended the shares. Lojas Renner SA led retailers higher after DBRS Ltd. today increased Brazil's credit ratings, raising speculation that Fitch may soon follow with its own upgrade.

``There's been a lot of rumors about investment grade coming from Fitch since the morning, and with this smaller one giving investment grade it helped boost'' the speculation, said Rogerio Poppe, who manages $4.5 billion at BNY Mellon Arx Investimentos in Rio de Janeiro.

The Bovespa index of most-traded shares on the Sao Paulo exchange jumped 2,161.16, or 3 percent, to 73,153.23. It was the largest gain since April 30, when the Bovespa rallied more than 6 percent after Brazil won an investment grade rating from Standard & Poor's. Mexico's Bolsa advanced 0.7 percent, while Chile's Ipsa lost 0.1 percent.

Toronto-based DBRS increased its credit ratings of the nation's long-term foreign and local-currency debt to investment grade. S&P's upgrade boosted banks and retailers as an upgrade makes it easier to access capital.

Cesp Jumps

Cesp had the biggest advance in the Bovespa, rising 9.6 percent to 31.50 reais. The possible sale of regional lender Banco Nossa Caixa SA, also controlled by Sao Paulo, to federally controlled Banco do Brasil, announced last week, may help secure federal backing to renew licenses for hydroelectric dams belonging to Cesp, Estado said, without citing anyone.

The state failed three times to sell a stake in Cesp because of doubts over the renewal of the licenses.

``It looks like the Sao Paulo government is in a good position to push the federal government to renew concessions'' for Cesp, said Carlos Eduardo Ramos, who oversees the equivalent of $5.39 billion in assets at BNY Mellon ARX Investimentos in Rio de Janeiro.

An index of utility stocks in the MSCI index rallied 4.6 percent for the biggest gain in a month. Cia. Energetica de Minas Gerais rose 6.7 percent to 38.50 reais. The country's biggest generator, known as Cemig, announced May 26 it had signed a 4.4 billion reais ($2.65 billion) contract to provide electricity to steelmaker ArcelorMittal through 2020.

``Cemig stands out because of its solid fundamentals, and as a generator it stands to gain from rising electricity prices,'' said Vicente Koki, analyst at Banif Investment Banking in Sao Paulo.

Banks Rally

Banco do Brasil gained the most in almost a month, rising 6 percent to 30.85 reais. Banco Santander said Banco do Brasil is Brazil's ``best bank,'' while Goldman analysts said it's the ``best buy'' among the nation's banks. Brazilian banks may post strong earnings growth this year and even better results in 2009, they said.

Uniao de Bancos Brasileiros SA, the third-biggest bank, gained 4.6 percent to 24.80 reais after Goldman raised its rating on the stock. The bank was raised to ``neutral'' from ``sell'' at Goldman, which said Unibanco's stock performance doesn't reflect its ``strong'' first-quarter results.

Lojas Renner, the nation's second-biggest retailer, rose 6.9 percent to 39.40 reais. Lojas Americanas, the largest retailer, climbed 3.1 percent to 12.81 reais.

AmBev Falls

Cia. de Bebidas das Americas fell for a second day, losing 2.6 percent to 115.50 reais. Itau Corretora analyst Ricardo Fernandez suspended his ``buy'' recommendation for AmBev, as Latin America's biggest brewer is known, on concern a possible acquisition of Anheuser-Busch Cos. by parent Inbev NV ``could result in a mess for the minority shareholders'' of AmBev.

Mexico's Bolsa index rose for a third day, led by retailer Grupo Elektra SAB.

Elektra, Mexico's largest seller of electronics, will benefit from expanding retail and banking operations in Brazil, brokerage Actinver SA said. Shares may gain to 442 pesos, up from an earlier estimate of 382 pesos, analysts Marisol Huerta and Mauricio Brocado wrote in a report today. Elektra advanced 1.7 percent to 386.91 pesos, the biggest gain since May 16.

In other markets, Argentina's Merval rose 0.8 percent, Peru's Lima General gained 0.1 percent and Colombia's IGBC index advanced 0.3 percent. The MSCI index of Latin American shares jumped 2.6 percent.

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Brazilian Stocks Rally Most This Month Led by Cesp Banks