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SAO PAULO, May 28 (Reuters) - Brazilian stocks rallied and the currency jumped on Wednesday after credit ratings agency DBRS raised Brazil to investment-grade status, fueling speculation that more upgrades may be on the horizon.
The Bovespa index .BVSP of the Sao Paulo stock exchange surged 3.04 percent to 73,153.23 points, within striking distance of its all-time high. Oil company Petrobras, power utility Cesp and banking shares led the index higher.
The Brazilian real BRBY rose in tandem with the Bovespa, jumping 0.96 percent to 1.656 per U.S. dollar. With those gains, the real has firmed more than 7 percent this year, putting it near its strongest level since January 1999.
Brazilian markets got a boost after DBRS raised Brazil’s debt rating to “BBB-“ from “BB+”, joining Standard & Poor’s in granting Latin America’s largest economy an investment-grade stamp of approval. The upgrade added to expectations that Fitch Ratings may also upgrade Brazil ratings soon.
“The market is rife with talk that Fitch could be next,” said Renato Schoemberger, a currency trader at Alpes Corretora, a Sao Paulo brokerage.
Analysts expect Brazil to attract a flood of foreign capital once it wins investment grade from all the major ratings agencies. Moody’s Investors Service and Fitch still rate Brazil one notch below investment grade.
Petrobras (PETR4.SA), the Bovespa’s bellwether stock, also earned an upgrade on Wednesday. S&P raised the state-run energy company to “BBB” from “BBB-“, citing an improved operating environment and sound fundamentals for oil prices.
The upgrade helped lift Petrobras’ share price, which finished 2.18 percent higher at 50.99 reais, recovering partially from a 3.2-percent slide on Tuesday.
The biggest gainer was Sao Paulo state power utility Cesp (CESP6.SA), which soared 9.6 percent to 31.50 reais on expectations the state government may soon resume plans to privatize the company.
“The market is considering the possibility the government may try again to sell the company,” said Tadeu Martins, research manager at Planner brokerage.
The state government canceled the sale of a controlling stake in Cesp in March after bidders failed to present offers in an auction.
Shares of Brazilian banks also gained after central bank data released on Tuesday showed credit demand in the country remains robust. Goldman Sachs said it has an attractive view on Brazil’s banking sector, particularly for 2009, on expectations an increase in loans to companies will offset a slowdown in lending to individuals.
Shares of Bradesco (BBDC4.SA), Brazil’s largest private-sector bank, rose 3.58 percent to 39.40 reais while Itau ITAU4.SA surged 3.5 percent to 48.85 reais and Unibanco UBBR11.SA climbed 4.64 percent to 24.80 reais.
Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange ended mixed even after inflation data released on Wednesday showed the benchmark IPCA consumer price index unexpectedly slowed in the month to mid-May. (Reporting by Fabio Gehrke and Aluisio Alves, Writing by Todd Benson; editing by Gary Crosse)