By Luciana Lopez
SAO PAULO, Sept 16 (Reuters) - Stocks in Brazil will close2010 with gains of another 10 percent, driven by strongfundamentals even as many of the world's biggest economiesstruggle in recovering from recession, a Reuters poll showed.
The gains would make up for a lackluster start to the firsthalf of the year, in which a worrisome global economy dragged onBrazilian stocks even as Latin America's largest economy boomed.
With an October presidential election likely to bring littlevolatility and a massive share offering from energy giantPetrobras on track for September, analysts see Brazilian stocksadvancing through year-end.
Sao Paulo stock exchange's benchmark Bovespa index willreach 74,750 points by the end of the year, 10 percent higherthan its Wednesday close of 68,106.85, according to the medianforecast of 18 analysts, strategists and fund managers surveyedby Reuters over the past week.
If reached, that would represent a 9 percent gain on theyear. A June poll put the Bovespa finishing 2010 only slightlyhigher, at 75,000 points at year-end.
End-2010 forecasts in the latest poll were in a 22,000-pointrange, from 63,000 to 85,000, much narrower than the 31,000point gap between the highest and lowest forecasts in the Junepoll. The poll predicted the Bovespa advancing further to justover 78,000 by mid-2011.
Brazil's economy has proven a global bright spot this year.During the first quarter, it grew at its fastest year-on-yearpace since at least 1996, when the government began tracking thedata in the current format.
While that searing pace stoked fears of overheating,second-quarter expansion slowed, while still remaining robust.Analysts see growth of 7 percent or more this year.
So far, October's presidential election has not spookedmarkets as front-runner Dilma Rousseff of the ruling Workers'Party has underscored her willingness to continue the policiesof her mentor, President Luiz Inacio Lula da Silva.
Rousseff now boasts commanding leads in opinion polls justweeks before the vote and looks increasingly likely to win theelection in a single round.
"With the presidential election being put to bed, that'spositive for the market," said Kathryn Rooney Vera of BulltickCapital Markets, adding that she expects stronger flows intoequities as risk aversion falls.
WORRIES ABROAD ABATING
While sluggish growth abroad could weigh on Brazilianstocks, some of those worries are fading, analysts noted.
Growth in the United States, the world's largest economy anda major influence on Latin America, remains slow, but the riskof a double-dip recession seems smaller, said Paulo Esteves,chief analyst with Gradual Investimentos.
"Worries (abroad) that were leaving the market uneasy havereceded a bit. That leaves investors free to focus on Brazil'sinternal factors, including its fundamentals," he said.
China's economic expansion will also be key. Asia's largesteconomy last year became Brazil's biggest trading partner and isa voracious consumer of commodities.
The Bovespa index includes a number of companies tied to thetrade in raw materials, including mining company Vale, theworld's largest producer of iron ore, which counts China as amajor customer.
The recent end of a monetary tightening cycle in the face ofmore moderate growth could keep consumer credit flowing and aidbanks such as Itau Unibanco, Banco do Brasil and Bradesco.
And state-controlled oil company Petrobras could advancethrough year-end if a stock offering worth up to $65 billionsucceeds.
Worries about the offering, which is linked to anoil-for-stock swap with the government, have prompted investorsto dump the stock recently. Petrobras shed about 25 percent thisyear through Wednesday's close.
Strong demand for Petrobras shares could also prompt othercompanies to sell stock, analysts said, bolstering the Bovespafurther.
(Additional reporting by Bangalore Polling Unit; Editing by JonLoades-Carter)