Foreign stock investment in May represent 30% of the year and boosts Ibovespa

RIO DE JANEIRO, BRAZIL – The U.S. monetary policy committee meeting minutes, linked to the Federal Reserve, caused volatility in the American stock markets and the S&P 500 index closed the week down by 0.43%.

Ibovespa did better, closing the week with a slight rise of 0.58%, at 122,592.47. In the month, the difference between the two exchanges is greater, the S&P 500 depreciated 0.60% from April 31 to this Friday, May 21, while the Ibovespa rose 3.11%.

The positive activity of the Brazilian index was sustained by the return of international investors. In the month, in only 19 days, R$8.268 (US$1.540) billion in foreign capital flowed into the companies listed on the B3 exchange, which represented 30% of the entire inflow of these funds so far this year.

The prospect of anticipation of a hike in U.S. interest rates caused volatility in the stock markets in the U.S. and to a certain extent disrupted their euphoria, which benefits the Brazilian stock market.

“From now on we should expect more volatility. The American stock market’s post-Covid recovery was almost linear, from now on the recovery should be positive but much more volatile and this will end up affecting assets”, says Thomás Gibertorni, analyst at Portofino Multi Family Office.

The Brazilian Real (R$) has greatly depreciated against the dollar due to the fiscal risk scenario and this is an advantage of the currency against its emerging peers, which have not depreciated as much against the American currency.

However, some domestic indications have been positive which, although unevenly, may lead to a recovery from the recent slump in the value of the Real. The bill to privatize Eletrobras has been forwarded to the Senate and, for better or worse, the budget for 2021 has been approved.

Analysts estimate that, compared to the dollar, the Brazilian real remains 10% cheaper than its emerging peers. “The dollar should be at around R$4.80 today and its differential against other emerging currencies should drop, but this will only happen if the dollar doesn’t appreciate too much in the international market,” says Gibertoni, from Portofino, who, like Felipe Miranda, from Empiricus, believes there is still room for growth in the Brazilian stock market.

“Several managers are looking more favorably at the Brazilian stock market, which in Brazilian Real terms is very cheap. Since the beginning of the year it has risen only 3.5% in Reais, while the others, Mexican, European, have risen over 10%,” he says.

The last three IBC-Brs, the economic activity index released monthly by the Central Bank, also posted good numbers, above the market’s expectations, revealing a boost in the months from January to March that exceeded analysts’ expectations.

Source: Veja

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