Banks will become the heaviest segment of Brazil´s benchmark stock index when the first revamp in the gauge's 45-year history takes effect next year, marking the rise in importance of service companies in Latin America's largest economy.
The decision by operator BM&FBovespa SA to rejig the index underscores investor pressure for a market gauge that better reflects Brazil's modern economy where sectors like oil and gas hold less sway than they did when the Ibovespa was set up in 1968.
The Ibovespa currently includes five stocks from four different banks, with a combined weighting of about 15 percent. After the index revamp in May that share will grow to between 20 percent and 25 percent, according to simulations carried out by BB Investimentos and Quantitas Asset Management
Itaú Unibanco Holding SA , Banco Bradesco SA, Banco do Brasil SA and Banco Santander Brasil SA are likely to get more room due to their large market value and strong trading volumes.
Combined, the four banks are worth about 430 billion reais. Mining giant Vale SA and state-run oil producer Petróleo Brasileiro SA , currently the top-two companies in the 73-stock index, have market capitalization of 186 billion reais and 238 billion reais, respectively.
The changes to the Ibovespa index will give more weight to a share's free float than its average daily trading volume, boosting the presence of large companies in the gauge and excluding companies whose shares introduce significant short- and medium-term distortions in the market.
Strategists said the changes will favor companies with large market capitalization in the education, mining, financial and consumer goods sectors. Airlines and power holding companies could lose room in the index too under the changes, which will be phased in through the first four months of next year.
Source: Reuters
