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Brazil shares end at record high, led by telecoms

SAO PAULO: Brazilian shares surged to a record on Thursday, led by telephone stocks, after Spain's Telefonica said it aimed to acquire full control of two local subsidiaries, traders said.

Telesp and Tele Sudeste, both owned by Telefonica, led the rally as investors snapped up shares to take advantage of the 40 percent premium Telefonica is offering as part of a share swap plan.

Sao Paulo's benchmark Bovespa index closed up 4.1 percent at 17,298 points, topping the previous record set on Dec. 30. Some 1.76 billion reais ($971 million) in shares changed hands -- almost double the average daily trade of 980 million reais in December.

"This is purely a reflection of the Telefonica deal since the price they're offering is very big," said Carlos Hokama, a fund manager at Credibanco. "The rest of the market is catching a ride."

Telefonica said it planned to issue $20 billion of new shares to take full control of four big Latin American units, including the Brazilian affiliates. The telecoms giant will swap Telefonica stock for local shares in a deal that represents a premium of 40 percent over local prices over the last five days.

Telesp ended up 13.8 percent at 51 reais while Tele Sudeste surged 20.7 percent to 16.71 reais. Market watchers recommended holding the stocks as they are converted into Telefonica Brazilian depositary receipts, giving local investors a stake in the Spanish company's global operations.

Brazilian authorities still have to determine whether pension funds and other investors will be allowed to buy shares in the purely foreign company.

Other phone stocks also surged amid speculation their foreign owners could opt for similar restructurings.

"This opens the door for other companies to do the same," Hokama said.

Telesp Celular, which is owned by Portugal Telecom, ended up 13.8 percent at 33 reais while Tele Norte Leste closed up 11.3 percent at 48.51 reais.

The companies also rose amid expectations of rising liquidity as investors look for new benchmark phone stocks after Telefonica takes control of local units and Telebras receipts ceases trading in April.

Telebras preferred receipts -- a basket of shares that includes Telesp and Tele Sudeste -- closed up 8.5 percent at 242.02 reais.

The Bovespa closed higher for the second day, bringing gains in so far this week to 6 percent. The index is up 1.2 percent since the beginning of the year.-Reuters