Brazil's Bovespa Closes Flat After Rate Hike

    --Bank stocks lose with Selic lower than some expected

    --Consumer stocks gain as investors see growth protected

    --'Growth dynamics' to keep holding Bovespa down, say analyst

    By Paulo Trevisani

    BRASILIA--Brazilian stocks were flat Thursday, as investors digested news of an interest-rate hike smaller than many of them expected on a background of slow global growth that could weaken Brazil's big exporters.

    The Bovespa index closed at 53165 points, up 0.54%.

    Late Wednesday, the central bank decided to increase its Selic benchmark rate by one quarter of a percent, to 7.5%. Ahead of the bank's move, analysts' forecasts were split almost equally between no rate increase, quarter-point hike or even half-point rise.

    Such split meant the stock market, which tends to weaken when interest rates go up, didn't feel too strong an impact, spending most of the day above the previous day's closing level but without huge swings.

    "The majority of the market was reassured that the central bank took action", said Robert Wood, a Latin America specialist at The Economist Intelligence Unit in New York, but a "rise in the Selic by 50 [basic points] would have more of an impact," he said.

    "The market was worried about the central bank hiking their rates and slowing down growth," said Claudio Irigoyen of Bank of America Merrill Lynch.

    Bank stocks were the most negatively affected by the small Selic increase, with Brazil's largest private bank, Itau Unibanco Holding closing down 4.89%, to BRL16.10.

    A high interest-rate environment is usually seen as beneficial for the sector as it allows banks to stretch the difference between the rates they pay and the rates they charge, analysts say.

    So, investors expecting a higher Selic increase weighed down on bank stocks when the hike came below their expectations, analysts say.

    "The banking sector as a whole is down," said Paulo Gala, from brokerage firm Fator Corretora.

    On the other hand, consumer-oriented stocks benefited from the perception that the central bank is reluctant to damage already fragile economic growth and consumption won't feel much of a pinch from the Selic hike, analysts said.

    The largest gainer in Bovespa Thursday was airline Gol Linhas Aereas Inteligentes SA. Brazilian airlines cut the number of seats offered on domestic flights by 6% in March at the same time that consumer demand grew by 1.1%, civil-aviation agency Anac said Wednesday. Gol expanded supply by 5.4% in comparison with the year-earlier month, Anac said.

    Gol's stock closed at BRL6.38, up 9.81%.

    But analysts still expect the Bovespa to remain sluggish for the time being, thanks to softness in the global economy.

    "The dynamics of stocks will be driven mainly by the dynamics of growth," Bank of America's Mr. Irigoyen said.

    Iron-ore producer Vale SA, one of the heaviest stocks in the Bovespa index, is one victim of the global sluggish recovery, Fator's Mr. Gala pointed out.

    Vale closed Thursday down 1.7%, at BRL30.45. It is down 25.5% so far this year.

    --Paulo Winterstein contributed to this article.

    Write to Paulo Trevisani at