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Brazilian shares sparkle as bargain hunters move in

RIO DE JANEIRO: Brazilian shares closed out the week on Friday on a bright note, with local and foreign investors chasing telecom, steel and oil stocks that looked like bargains after last week's losses, traders said.

Sao Paulo's benchmark Bovespa index ended 2.72 percent higher at 17,932 points, extending a two-day trend that followed a U.S. Federal Reserve move to raise interest rates by an expected 25 basis points. The move removed a factor that had been weighing the market down.

"We saw some local buyers, but also foreign funds coming in. They have to because everything looks so cheap in dollar terms," said Tomas Taterka, head of trading at Banco Cidade.

Fears that an aggressive rate increase by the U.S. Fed would suck away foreign capital toward tempting interest rates in the United States had dogged the Brazilian market over the past couple of weeks. But the Bovespa ended Friday with a seven percent gain during the week and a five percent rise so far this year.

The market basically ignored news that the cash-strapped state of Minas Gerais could default on $108 million in Eurobonds next week, a threat the federal government headed off by getting the state to agree to debt renegotiation.

The shares of telephone companies continued to be strong favourites, with a growing Internet business in Brazil helping make the now privatised firms attractive.

Telebras receipts, a basket of post- privatisation telecoms shares, closed 4.2 percent higher at 260 reais and accounted for a hefty chunk of the total 1.04 billion reais ($588 million) in trade.

Brazil's main long distance company, Embratel, gained 3.9 percent to 48 reais.

But fixed-line operator Tele Centro Sul bucked the trend -- closing down 0.9 percent at 27.70 reais -- on worries about its struggle to acquire control in neighbouring Cia Riograndense de Telecomunicacoes (CRT) from Spain's Telefonica. CRT also posted losses, dropping 1.74 percent to 565 reais.

But metal and petroleum producers shined, with steel maker Acesita jumping 9.35 percent to 1.52 reais and the preferred shares of heavily-weighted state oil firm Petrobras finishing 1.1 percent higher at 447 reais.

Traders said investors were shopping for companies other than electricity utilities because of concerns that price increases could be capped along with the worrying struggles for management control in some of the newly privatised firms.-Reuters