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Brazil Homebuilders Rose ‘Too Far, Too Fast,’ Santander Says

Brazil Homebuilders Rose ‘Too Far, Too Fast,’ Santander Says - Brazil - Home Builder

Brazilian homebuilders dropped the most in two weeks in Sao Paulo trading after Banco Santander SA said they rose “too far, too fast” on a government stimulus plan and are now trading at expensive valuations

Tecnisa SA tumbled 9.5 percent to 5.25 reais, leading the 3.7 percent drop in the BM&FBovespa Real Estate index. Cyrela Brazil Realty SA Empreendimentos & Participacoes, Brazil’s biggest builder, dropped 1.8 percent to 14.52 reais. Construtora Tenda SA, the low-income unit of Brazil’s second-largest homebuilder, fell 5.6 percent to 3.40 reais.

Brazilian President Luiz Inacio Lula da Silva said March 25 that the government will spend 34 billion reais ($16.2 billion) to build a million homes for low-income workers. Part of the funding would be channeled through federally controlled Caixa Economica Federal, or CEF.

“The stocks incorporate a lot of the benefits of the package, making it hard to find value in the sector,” analyst Marcello Milman wrote in a note. “Pricing in so much so soon (without evidence that things are working that well in CEF), we believe the stocks are subject to a correction, and thus recommend investors take profits in the sector.”


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