News: Petrobras shares slump as Brazil’s Bolsonaro doubles down on intervention.
RIO DE JANEIRO (Reuters) – Petrobras shares fell 21% on Monday, wiping out the 70 billion reais ($ 12.7 billion) market value when Brazilian President Jair Bolsonaro re-criticized his pricing policy after hitting the The market-friendly policy of the state-controlled oil company had replaced the CEO with a retired army general.
The sell-off after a series of analyst downgrades worsened after Bolsonaro said the company’s fuel policy was only encouraging to financial markets and select groups in Brazil and should be changed as part of efforts to cut gasoline and diesel prices.
Overall, the last few days have been a dramatic turnaround for Bolsonaro, a right-wing populist whose interventionist instincts have so far been largely dominated by economically conservative allies.
Shares in state-owned electricity company Eletrobras also fell Monday after Bolsonaro announced that this would be the next sector the government would “stick its finger” in.
Commenting on Brazil’s Radio Bandeirantes on Monday, Joaquim Silva e Luna, the man who was tapped by Bolsonaro on Friday to take the reins from Roberto Castello Branco, had the idea of a government fund or “pillow” to counter the effects of volatile fuels reduce prices for consumers.
Bolsonaro doubled his criticism of Castello Branco and mocked his decision on social distancing since the beginning of the coronavirus pandemic, the severity of which the president has repeatedly downplayed.
“Now, to be very clear, the current managing director of Petrobras has been at home for eleven months, without work and working remotely. Now the boss has to be at the forefront, “said Bolsonaro, adding:” That is unacceptable to me. “
BONDS HIT TOO HIT
Analysts from Credit Suisse, Santander, Scotiabank, Bank of America, Bradesco and XP were among those who downgraded their recommendations on shares in Petroleo Brasileiro SA, as the Rio de Janeiro-based maker is known.
“A good reputation is difficult to earn and easy to lose,” said BTG bank analyst Thiago Duarte in a message to customers.
Petrobras’ “all-important” pricing policy and its impact on cash generation and planned asset sales, especially refineries, have tarnished debt deleveraging and dividend prospects, Christian Audi-led Santander analysts said in a statement to customers after downgrading their recommendation for the stock to “hold” from “buy”.
Dollar-denominated debt issued by Petrobras also suffered significant losses as the bond fell 7.6 cents in 2043 to trade at a seven-month low of 98 cents against the dollar, refinitive data showed.
Bolsonaro announced the appointment of Silva e Luna, a former defense minister who managed the giant Itaipu hydropower plant, to replace Branco through one Facebook Post after close of trading on Friday.
The retired general, who lacks experience in the oil and gas industry, said in an interview with Radio Bandeirantes that he had not spoken about it and had no opinion on a possible privatization of the company.
On Saturday, Silva e Luna told Reuters that the company needed to find a “balance” in fuel prices given the impact it will have on shareholders, investors, sellers and consumers.
Brazilian securities industry watchdog CVM is expected to open an investigation into the leadership change on Monday, according to a source knowledgeable about the matter.
Brazil’s listed preferred stock had reduced losses slightly, down 19.3% by noon. This was the biggest intraday loss since the pandemic that hit Brazil seriously in March.
($ 1 = 5.52 reais)
Reporting by Sabrina Valle, Paula Laier and Gram Slattery, additional reporting by Aluisio Alves and Tatiana Bautzer in Sao Paulo; Karin Strohecker in London, editing by Jason Neely, Paul Simao and Emelia Sithole-Matarise
Original Source © Reuters