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Brazil stocks end lower as bank issues drop again

SAO PAULO: Brazilian stocks, led by banking issues, dropped 1.7 percent on Thursday as a retreat on Wall Street prompted further profit-taking in Brazil after sharp gains earlier in the week, traders said.

Banking stocks extended their losses from the previous session amid fears of stepped-up competition, after news on Wednesday that Spain's BSCH bank was buying Brazil's Meridional financial group. Shares of Bradesco, the country's biggest bank held by private interests, fell 3.9 percent to 15 reais, and No. 2 Itau dropped 3.3 percent to 147 reais.

Sao Paulo's benchmark Bovespa index ended down at 17,176 points, showing losses for the third day in a row in tandem with Wall Street, where stocks were off 1.2 percent near the close.

"Today we initially hoped that stocks would rise and erase yesterday's losses, but Wall Street triggered a new wave of profit-taking," said Marcelo Porto of Concordia brokerage.

He said most stocks would probably hold steady and perhaps rise in the next few sessions.

Brazilian stocks had rallied to record highs on Monday after Spain's Telefonica said it was moving to buy all the outstanding shares in two Brazilian phone units as part of a larger share-swap plan.

Since then, the Bovespa index has fallen nearly 5 percent as investors skimmed profits.

"Today was a day of profit-taking in most stocks after Telefonica's rash earlier. People create a cause, pump up the prices and then adjust them," said Gabriel Scrimini of Tudor Asset Management.

He noted that some second-tier stocks such as steelmaker Acesita posted solid gains on Thursday. Acesita, after being bypassed by the market's rally, rose 7.6 percent to 1.55 reais on Thursday.

Earlier, the Sao Paulo stock exchange said trading of new Telebras receipts -- the basket of shares grouping the companies that were carved out of the privatised Telebras telecommunications system -- would begin on Monday. The new receipts exclude Telesp or Tele Sudeste Celular, the two companies linked to Spain's Telefonica.

Concordia's Porto said market sentiment was mixed about the future of the receipts, one of the most liquid, or easily traded, stocks on the Brazilian market.

"Many are saying that it is the end of their liquidity. But I think they will stay for a while, because there are too many derivatives linked to the receipts."

Telesp closed 2.1 percent lower at 52.1 reais and Tele Sudeste slumped 3 percent to 17.5 reais. Telebras preferred receipts fell nearly 2 percent to 242 reais.

Overall turnover was a moderate 757 million reais, compared with daily average of 980 million reais in December.

After Thursday's decline, the Bovespa is still up 0.5 percent in January.-Reuters