UBS sees 20 pct growth in Brazil stock offerings

NEW YORK (Reuters) - Stock offerings in Brazil are likely to increase by about 20 percent in number and in amount of money raised this year from a record 2006, the head of equity underwriting at UBS said on Monday.

A downturn three weeks ago in world stock markets sparked by a plunge in Shanghai and subsequent concerns about the U.S. subprime mortgage market have not led to any delays in Brazilian offerings, said Sebastien Chatel, a managing director at UBS (UBSN.VX), a leading underwriter for equities in the region.

There is no sign yet of a peak in the market, he said. Recent market volatility "thus far it hasn't delayed anything, and the issuance calendar still looks pretty heavy."

Brazil accounted for about three-fourths of regional stock offerings last year, and about the same is expected this year, Chatel said at the Reuters Latin American Investment Summit.

"In terms of numbers, new issuances, I think probably something like 20 percent up, obviously very dependent on market conditions," Chatel said.

As of last week, 22 companies had registered this year with CVM, Brazil's securities regulator, to raise money through share offerings. So far this year, stock offerings have raised about 8.8 billion reais, compared with about 31.1 billion reais (about $14.8 billion) for all of last year, according to CVM.

"Brazil is still a very, very young market, and it has a long way to go," Chatel said. "There is no reason to think we're at the top of the cycle. It has two to three years to run."

HIGHER OFFERING PRICES

Chatel also said that new offerings this year may price higher than last year's. Shares sold on the Novo Mercado, which has higher corporate governance standards than the older Bovespa market, are pricing at about 15 to 20 times forward earnings, he said.

Offerings on the Bovespa, which lists companies that issue both voting rights and non-voting rights shares, have traditionally priced at single-digit ratios, he said.

Share prices rose following about 90 percent of offerings last year, which is high, he said. "Very few have failed to deliver."

That number may fall, however, as the number of offerings rises, even while more Brazilian investors are likely to enter the stock market, driven by the search for yield as interest rates in Brazil decline, he said.

Chatel also said UBS has seen instances in which some institutional investors have relatively limited amounts of cash to invest in offerings, which suggests they will become more selective.

"A huge amount of companies are trying to go public" in Brazil, he said. Offerings are likely to lean toward consumer-oriented companies, seeking to take advantage of increased prosperity and spending as interest rates fall, he said.

Meanwhile, Mexico's share offering market, traditionally the largest in Latin America after Brazil's, is likely to pick up in the second half this year based on UBS's deal pipeline, he said.

UBS, which last year bought Brazilian investment bank Banco Pactual, vies with Credit Suisse as the largest underwriter of share offerings in Brazil.