The Brazilian equity market is set to rebound as investors look forward to the long-term opportunity of investing in South America’s largest market.
The initial pull-back in the market following the victory by incumbent President Dilma Rousseff was short-lived. “The equity markets initially sold off over 4% in early trading on October 27 after a very close weekend election (October 26) but closed only 2.7% down by the end of the day. The next day, the market regained the lost ground,” says David Kunselman, Senior Portfolio Manager with Excel Funds Management Inc.
Adds Kunselman: “investors were anticipating political change and over-reacted when Rousseff defeated her rival Aceio Neves in a closely contested electoral run-off.” Rousseff garnered 51.7% of the total votes.
Brazil continues to offer investors:
• Social and economic growth, combined with stability and environmental sustainability
• A strong open domestic market with quality companies
• Clean and abundant renewable energy
• Democratic stability
Cognizant of the need to reinvigorate the economy and the market, Rousseff told Brazilians: “We will continue to build a better Brazil, more inclusive, more modern, more productive, a country of solidarity and of opportunities.”
She recognizes the need for change and said her second term would be characterized by dialogue, with political reform as a priority.
Incidentally, during the 12 years that the Dilma’s Workers Party has ruled Brazil, almost 40 million people – or a fifth of the population has moved out of poverty. Dilma has pledged to continue this trend.
Source: Bank of America Merrill Lynch, GEMs Paper #18, Fixed Income Strategy & Economics
September 9, 2014.