Brazil’s fortunes slump on bubble fears, China tightening

SAO PAULO, January 31, 2010 (AFP) – Fears of a speculative asset bubble and moves by China to rein in an overheating economy have taken their toll on Brazil, eroding equity prices and the national currency, the real. The strongest warning for Latin America’s biggest economy, still seen as one of the most attractive of the emerging markets, came from the Organization for Economic Cooperation and Development.

“There’s… a danger of asset bubbles in places like Brazil or places like India and we should be careful about that — that is a real threat,” OECD chief Angel Gurria told CNBC television last Thursday.

His words came as investors appeared to also start to realize the risk, pulling more than 500 million dollars out of the Sao Paulo stockmarket in January.

The Bovespa index slumped 4.7 percent over the month — a significant turnaround for a bourse that had been strongly rising on the recovery in the global economic downturn.

The currency, the real, also suffered.

It is now at its lowest point against the dollar since September 2, 2009 after a nine-day losing streak that has reduced its value to 1.885 reals to the greenback. The decline undercut some of the gains made last year, when the r