Brazil Shares to Get 2% Gain From Debt Upgrade, Merrill Says

By Adam Haigh
March 10 (Bloomberg) -- Brazilian stocks will rise ``only'' 2 percent if the nation is given an investment-grade credit rating this year, according to Merrill Lynch & Co.
Latin America's biggest economy will probably be upgraded in 2008, Sao Paulo-based strategists Pedro Martins Jr. and Fanny Oreng wrote in a report dated March 7.
``What was once a meaningful driver for the equity market becomes less relevant in 2008,'' they said. Two years ago, Brazil stocks would have likely surged 20 percent on an investment-grade rating, they added. Brazil's Bovespa index has advanced five straight years, rising more than fivefold since the end of 2002.
Brazil became a net foreign creditor for the first time this year, inflation dropped to a seven-month low in February and the nation's benchmark interest rate is at a record low 11.25 percent following two years of cuts. The country's economy probably grew at a 4.8 percent rate last year, the fastest since 2004, according to the median economist estimate in a Bloomberg survey.