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Brazil shrs down

SAO PAULO: Brazil shares pared some losses but ended off 1.89 percent as investors took profits after a sharp rise over the last few sessions, brokers said on Tuesday.

The Bovespa index of the 54 most traded stocks .BVSP closed down 831 points at 43,108 points. Turnover fell a slight 14.1 percent to 309.2 million reais ($330.4 million).

Analysts said a cumulative rise of 13.32 percent in stock prices since the beginning of August prompted investors to sell today.

aa Despite a small drop in the market's trading volume, some brokers said speculative foreign capital flows continued to influence the bourse's turnover.

Analysts noted that banks have been carrying out day-trade operations buying stocks with foreign funds introduced through the commercial exchange rate. However, the stocks have been promptly sold and the proceeds were changed on the floating foreign exchange market, where the real has been traded at a lower level than on the commercial market.

The operation increased over few sessions on fears that the government might adopt restrictions on capital inflows.

In July, Brazil posted a record dollar inflow of $3.98 billion. So far in August, the country's balance of payments show a $2.06 billion net surplus.

Growing capital inflows and, as a result, higher foreign reserves levels were seen as positive and allowed the central bank to cut domestic interest rates, analysts said.

But an excessive increase in foreign capital inflows could fuel inflationary pressures as the central bank would be forced to intervene in the foreign exchange market to buy dollars and issue reais.

Benchmark state telecom Telebras TEL.SA shares continued to lead the market and accounted for over 70 percent of today's total trade, brokers said.

Telebras preferred closed down 2.01 percent at 39 reais, while Telebras common shares dropped 2.48 percent to end at 33.40 reais.-Reuter