Share sales by Brazilian companies may more than double to a record in 2006 as central bank interest rate cuts boost demand for stocks, Banco Itau Holding Financeira SA's Jean-Marc Etlin said.

Brazilian companies, which have already sold about $6.5 billion in shares in 2006, may sell as much as another $10 billion by year-end, more than doubling the volume this year from a record $7 billion in 2005, said Etlin, executive vice president at Itau's Banco Itau BBA SA unit.

"It's reasonable to expect the volume will double,'' Etlin, a former head of Latin America investment banking at UBS AG, said in an interview in Sao Paulo. "We should have a new record.''

Today's government report showing consumer prices in Brazil had their biggest drop in eight years stoked expectations that policy makers this month may cut the country's benchmark lending rate to a record low, fueling demand for new shares as returns on bonds decline.

Cyrela Brazil Realty SA Empreendimentos e Participacoes, a Brazilian real estate developer, is among companies planning to sell shares this year. Cyrela yesterday said it plans to sell 24.7 million new voting shares worth 810.2 million reais ($372 million).

"The decrease in interest rates will make the stock market more attractive,'' Etlin said.

Outlook

Tim Participacoes SA, a unit of Telecom Italia Mobile SpA, and Brasil & Movimento SA, a bicycle maker, have suspended plans to sell shares after rising U.S. interest rates lured investments away from stocks in Latin America's biggest economy.

Tim and other Brazilian companies will probably resume plans to sell shares in initial and secondary offerings after August as investors resume inflows to emerging markets, Etlin said.

"The turbulence is not entirely over yet,'' Etlin said. "We'll likely have a more significant rebound in September.''

Brazil posted a net outflow of dollars for the first time in 10 months in June as rising U.S interest rates lured investments away. Net dollar outflows totaled $2.68 billion last month, compared with $7.5 billion of net inflows in May.

The Sao Paulo Stock Exchange had a net outflow of about $1 billion in June, the largest since at least 1993, when the exchange started tracking foreign investments.

Other companies that have registered to sell stock in Brazil this year include Gol Linhas Aereas Inteligentes SA, Brazil's No. 1 airline by market value, and phone company GVT Holding SA.

(Published Bloomberg, July 07, 2006)
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