Brazil's stocks in biggest freefall since 9/11
(Updates to close)
SAO PAULO, Feb 27 (Reuters) - Brazil's stocks plunged on Tuesday to their biggest loss since Sept. 11, 2001, and its currency sank as sharp losses on Chinese equities markets spread around the world and doubts mounted about the U.S. economy's health.
The Bovespa .BVSP index of the Sao Paulo Stock Exchange fell 6.63 percent to close at 43,145 points on heavy volume of about $2.5 billion. Only last week the index hit a record high.
Brazil's currency, the real (BRBY), which had been trading near its strongest level since May 2006, weakened some 1.7 percent to 2.12 per U.S. dollar. It was pressured in part as Brazil's central bank once again bought dollars to build up foreign reserves.
Before the drop in Chinese stocks of nearly 9 percent, Brazilian asset prices had soared for much of the past three years as foreign investors poured cash into emerging markets, seeking higher returns in exchange for greater risks.
Brazil's Central Bank President Henrique Meirelles said this "temporary euphoria" that had been pushing emerging markets upward may have ended.
Brazil, a farming and mining giant, has benefited from soaring commodities exports to China and the United States. Slowdowns in either economy could hurt Brazilian companies.
"The market is entirely stressed. It started with a big sell-off in China," said Daniel Szikszay, head of currencies at Banco Schahin in Sao Paulo.
Some traders said local markets were overdue for sell-offs even though Brazil's economy has sound fundamentals like tame inflation, rising international reserves and a primary budget surplus.
"The bourse and the currency were on upward trajectories that exposed them to this type of correction, however large," said Jorge Knauer of the Prosper brokerage.
On the stock market, blue chip stocks Petrobras (PETR4.SA) and iron ore miner CVRD (VALE5.SA) were among the biggest losers.
Petrobras, the heaviest stock in the Bovespa index, slumped 6.6 percent to 42.60 reais, hit by rocky international oil prices.
CVRD lost 7.93 percent to 60.26 reais. Standard & Poor's said in a report late on Monday that CVRD's purchase of Australian coal producer AMCI Holdings helps improve the company's diversification. S&P expects the mining company to "aggressively reduce" its debt position in 2007, benefiting from high ore prices.
Banco do Brasil (BBAS3.SA), Brazil's biggest bank, fell 2.45 percent to 67.70 reais. The bank said on Tuesday fourth-quarter profits jumped 69 percent to 1.25 billion reais, fueled by a rise in lending and lower provisions for bad debt. The bank expects its loan portfolio to rise 30 percent in 2007, about the same increase as in 2006.
Steelmaker CSN (CSNA3.SA) fell 8.51 percent to 71.91 reais. The company is on the hunt for foreign acquisitions after losing a bid for Anglo-Dutch company Corus, but it may take some time before a deal takes shape, Chief Financial Officer Otavio Lazcano told Reuters.
