[SAO PAULO] Brazil's shopping malls are proving to be the latest bond-market casualties of the nation's economic malaise.

General Shopping, the owner of 18 malls, had its rating cut by Moody's Investors Service on May 9 on concern a building boom in shopping centres will end up harming creditors as consumers stung by surging interest rates curtail spending. The downgrade pushed losses on the company's US$250 million of perpetual bonds to 3 per cent this year, compared with an average 3 per cent gain for junk-rated emerging-market debt.

Investors are growing concerned that General Shopping, which is building three more shopping centres, will struggle to fill its malls as the slowdown in Latin America's biggest economy deepens. One measure of vacancies in high-end commercial properties in Sao Paulo is soaring to the highest in a decade as retail sales slump and Brazil carries out the world's longest cycle of rate increases to tame inflation.