(Bloomberg) — Brazilian markets fell after a lower-than-expected dividend payment from state oil giant Petroleo Brasileiro SA reignited concerns about increased government intervention in the country's biggest companies.
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The Brazilian real fell by as much as 1.1% on Friday, leading the decline in major currencies around the world, while long-term swap rates rose. The benchmark Ibo Vespa stock index fell to its lowest level in more than three weeks, dragged down by a decline in Petrobras shares, which account for 13% of the index's weight. The company's stock price fell more than 10%, wiping out about 56 billion reais ($11 billion) of its market capitalization.
The decline in dividends for oil producers has added to concerns that the country's left-wing government is seeking to wield greater influence over the corporate sector to advance its political agenda. Analysts at Bank of America and Banco Santander SA quickly removed their buy-equivalent ratings on Petrobras. Petrobras' chief executive is taking a more cautious stance on shareholder compensation as the company focuses on becoming a renewable energy powerhouse, a key policy objective of the Brazilian government. President Luiz Inacio Lula da Silva.
“The signs are getting worse and worse,” said Malcolm Dawson, senior portfolio manager and head of emerging markets strategy at Global X Management Company in New York. “There are considerable opportunities in front of Brazil, but the stock benchmarks are built on Petrobras and Vale, both of which carry unpredictable political risks.”
The company's board approved a fourth-quarter dividend of 1.10 reais per share, or 14.2 billion reais, below the average of four forecasts reviewed by Bloomberg. The company also refrained from paying extraordinary dividends.
The dividend announcement comes as a setback for Brazilian investors after a period of relatively limited domestic political noise, while the real is touted as an attractive investment for carry traders.
Investors are also keeping an eye on the ongoing CEO succession battle at mining company Vale SA for clues about whether President Lula's government will be successful in promoting a candidate with strong government ties. .
–With contributions from Rafael Almeida dos Santos and Jeremy R. Cook.
(Update on market close.)
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