Brazil’s large companies’ IPOs expected to attract more foreign investors to stock market

RIO DE JANEIRO, BRAZIL – Despite the critical pandemic situation, the fiscal imbalance and the difficulty in advancing reforms, foreigners are signaling that they are once again betting on Brazil. Since January, the balance of foreign money in B3, the São Paulo stock exchange, has reached a positive R$44 (US$8.7) billion – a figure that sharply contrasts with the first half of last year, when the stock exchange saw an outflow of R$76 billion from foreign investors.

And the market expects this flow to improve even further, driven by large companies’ IPOs scheduled for July – such as Cosan’s Raízen, Votorantim’s CBA, and CSN Cimentos.

“We are likely to have a very strong ‘window’ (of IPOs). In recent weeks we have seen a resumption in the entry of foreigners. And to attract foreigners, the larger the operation, the easier it is,” says Roderick Greenleess, Itaú BBA’s global head of investment banking.

“We are now seeing a somewhat larger volume of foreigners than in the recent past. They have started to set up a position in Brazil, and this helps, but for now it has been occurring mostly in the secondary market (in shares already listed on the stock exchange),” says Fábio Nazari, BTG Pactual’s partner in charge of equities.

The executive mentions that the stock market experienced a recent rally and, despite more volatility in the past few weeks, demand for the latest offers has been high. BTG itself made a stock offering this month of almost R$3 billion, registering high demand.

Towards a record

Large IPOs scheduled for next month have been exciting the market. Investment banks are projecting that the new round of IPOs, between July and September, will generate around R$40 (US$8) billion.

This should lead to a new record for share issues this year – R$80 billion have been issued since January. Itaú BBA, for its part, foresees a total volume this year of between R$150 billion and R$170 billion.

“We are very optimistic about the next ‘window’ (of IPOs). We see that, after some positive local data, such as the resumption of activity levels, we are once again witnessing a flow of foreigners (on the stock exchange). The current context is showing a more positive moment than the January window,” says Bruno Saraiva, co-head of investment banking at Bank of America in Brazil.

Therefore, he believes that foreign investors should take a significant part in the upcoming IPOs. “There is room for good companies,” he says.

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